Anti-ESG bill vetoed by Arizona governor

Arizona Gov. Katie Hobbs vetoed a bill that would have prevented public entities in the state from requiring a company to implement an environmental, social, and governance policy as a condition for obtaining or renewing a government contract for goods or services. 

The measure passed the Republican-controlled legislature in tight votes of 16-12 in the Senate in March and 31-27 in the House in May. A two-thirds vote in each chamber is required to override a veto.

“I do not believe that tying the hands of the state’s procurement and investment professionals is in the best interests of the people of Arizona,” the Democratic governor said in her June 16 veto message.

Republican State Sen. Anthony Kern, the bill’s sponsor, said it would have ensured state contracts do not push ESG goals. 

“Tax dollars should not go to partisan organizations and organizations that implement politically driven policies,” he said in a statement. “The governor had the opportunity to put a stop to this clear form of discrimination, and instead, chose to support it.”

The bill would have prohibited public entities from adopting procurement, investment, or other policy that has the effect of inducing or requiring a company to implement an ESG standards policy. It would have applied to state departments, agencies, boards, and commissions; cities, counties, and school districts; as well as community college districts and universities under the jurisdiction of the Arizona Board of Regents. 

Bills considered this year in several state legislatures were aimed at purging ESG factors from pension fund investments or denying government contracts with companies determined to be “boycotting” fossil fuel and other industries.

Earlier this month, Alabama Gov. Kay Ivey signed into law a contract prohibition with companies engaging in boycotts against an expansive list of industries. Texas and Oklahoma laws enacted in 2021 and 2022, have led to some big municipal market investment banks losing the ability to underwrite government bonds in those states.

In March, Hobbs vetoed Senate Bill 1096, which would have required governmental contracts worth at least $100,000 to include written certification from a company that it does not discriminate against the firearm industry. 

The governor said that bill was unnecessary and could lead to a bank exodus from the state.