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NASHVILLE – Senator Rusty Crowe (R-Johnson City) has co-sponsored legislation that ensures taxpayer investment decisions are based on financial factors and not environmental, social or governance (ESG) ones. ESG factors include issues such as climate change, critical race theory and social credit scores, among others. Governor Lee signed the bill into law on Wednesday.

The legislation specifically prohibits the Tennessee Treasurer from making investments based on ESG ratings, which value companies based on their advancement of environmental and social causes unrelated to core business functions. The legislation will ensure Tennessee tax dollars are being invested to maximize investment returns rather than to push a public policy agenda.

“It is wrong to use taxpayer savings to invest in controversial political agendas,” said Crowe. “It is the state’s legal responsibility to invest taxpayer funds based on financial factors that maximize return and not based on the goals of activists. I am pleased Tennessee is joining a growing list of states that have pushed back on the financially irresponsible ESG rule issued by the Biden administration.”

Last year, the U.S. Department of Labor implemented the ESG rule, which allows retirement plan managers to make investment decisions based on ESG factors instead of focusing on financial ones. In response, Congress passed legislation that would nullify the department’s new rule, but President Biden vetoed that legislation. Tennessee is one of at least nine other states that have since prohibited or discouraged ESG investments, including Arkansas, Kansas, Kentucky and Montana.

The legislation applies to investments made on or after July 1, 2023.