Arizona

Title

Key Dates

Nature of
Action

ESG Category

Summary

Arizona Attorney General Kris Mayes Announces Exit from Investigation into ESG Investment Practices

Adopted and in effect
2/13/2023

Attorney General Position

Affirmatively Not Restricting ESG

■ Democratic attorney general announces that Arizona will stop participating in investigations into the ESG practices of financial institutions. "Corporations should be permitted to access capital markets in ways that they feel are necessary for the advancement of their investor objectives and for society, as long as they are doing so in a lawful manner," Mayes said.

 ■ As announced by Arizona State Treasurer Yee, "At the beginning of this year, I led in the national divestment effort to remove any exposure we had with BlackRock. In February of 2022, my office divested more than $543 million from BlackRock money market funds and reduced our direct exposure to BlackRock by 97% this year...The divestment was the result of a review by our internal Investment Risk Management Committee (IRMC) that began in the fourth quarter of 2021. Part of the review by IRMC involved reading the annual letters by CEO Larry Fink, which in recent years, began dictating to businesses in the United States to follow his personal political beliefs. In short, BlackRock moved from a traditional asset manager to a political action committee. “Our internal investment team believed this moved the firm away from its fiduciary duty in general  as an asset manager. Once the review was completed, I approved the IRMC proposal to stop using money market funds by BlackRock and reduce Arizona's Treasury exposure to BlackRock in a prudent fashion."

SUBSEQUENT DEVELOPMENTS

Revised Policy

Arizona Treasury Kimberly Yee Announced Newly Adopted Investment Policy Statement That Protects Taxpayer Dollars from ESG Policies

Adopted and in effect
8/30/2022

IPS Revisions

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ The updated investment policy statement of the state treasurer's office has been amended to now require that all investments by or on behalf of the state treasurer be based on a fiduciary standard of care and only consider pecuniary factors when evaluating an investment or discharging its duties with respect to the investment policy statement.

■ A "pecuniary factor" is a factor that has a material effect on the financial risk or financial return of an investment based on appropriate investment horizons consistent with the investment policy statement. Non-pecuniary factors may not be considered or include any factor that is intended to further or is branded, advertised, or otherwise publicly described by the offeror as furthering any of the following: (1) international, domestic, or industrial agreements relating to environmental or social goals; (2) corporate governance structures based on social characteristics, or (3) social or environmental goals.

■ The updated policy also stipulates that fiduciaries entrusted with Treasury assets may not vote shares based upon non-pecuniary factors.

(Now Former) Arizona Attorney General Announces Action to Stop Coercive Investment Practices

Adopted and in effect
11/17/2021

Enforcement / Divestment

Target Entities that Boycott Certain Industries

■ Announced an investigation by the Arizona attorney general's office regarding the ESG investment practices and Climate Action 100+ membership of large investment companies.

SUBSEQUENT DEVELOPMENTS 
On February 13, 2023, Arizona's new Democratic attorney general, Kris Mayes, announced that Arizona would stop participating in investigations into major American banks and other financial institutions over ESG practices related to investing.

Title

Key Dates

Nature of
Action

ESG Category

Summary

HB2457/SB1013: Government Investments; Products

Introduced

1/17/2024

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Requires any fiduciary to a state or municipal plan to discharge its duties solely in the interest of the participants and beneficiaries for the exclusive purpose of providing pecuniary benefits, defraying reasonable expenses of administering the plan and earning a return on the investment. 

■ Fiduciaries shall only take into account pecuniary factors when evaluating investments or discharging their duties, and not consider nonpecuniary factors. Pecuniary factors means any factor that has a material effect on the financial risk or financial return of an investment based on appropriate investment horizons consistent with a plan's investment objectives and funding policy.  Nonpecuniary factors includes anything that is intended to further or is branded, advertised or otherwise publicly described as furthering (a) international, domestic or industry agreements relating to environmental or social goals (i.e., Net Zero (NZAM) or Climate Action 100 initiatives/pledges), (b) corporate governance structures based on social characteristics or (c) social or environmental goals. 

■  Also requires proxy voting to be based solely on pecuniary factors and may not be voted to further ESG benefits or goals.  The plan also may not entrust any assets to a fiduciary that has a practice of engaging with or committing to engage with a company based on nonpecuniary factors.  A fiduciary may not adopt a practice of following the recommendations of a proxy advisory firm or service provider unless the provider's proxy voting guidelines are consistent with the fiduciary's obligations to act based only on pecuniary factors.

SB1014: Business; Discrimination Prohibition; Social Criteria

Introduced

1/8/2024

Legislation

Prohibit Discrimination on Basis of Social Credit or ESG Scores

■  Prohibits financial institutions, insurers, and credit reporting agencies doing business in Arizona, either directly or through a contractor, from discriminating against any person based on a political affiliation, or other social credit, environmental, social, or governmental score or similar values-based or impact criteria.

■  A "financial institution" means banks, trust companies, savings and loan associations, credit unions, consumer lenders, international banking facilities and financial institution holding companies under the jurisdiction of the department.

■  Allows a financial institution to offer investments, products or services to a potential customer or investor that include subjective standards, if the standards are fully disclosed and explained before entering into a contract for the investments, products or services.

Title

Key Dates

Nature of
Action

ESG Category

Summary

SB1612: Investments; Financial Institutions; State Treasurer

Introduced, but did not pass in the 2023 legislative session

Legislation

Target Entities that Boycott Certain Industries

■ Allows the state treasurer to cancel state contracts with financial institutions that have written ESG policies boycotting fossil fuels. Allows the attorney general to investigate such financial institutions. Prohibits public entities from investing in or with such financial institutions.

SB1138: Business; Discrimination Prohibition; Social Criteria

Introduced, but did not pass in the 2023 legislative session

Legislation

Prohibit Discrimination on Basis of Social Credit or ESG Scores

■ Prohibits financial institutions, including insurers and credit agencies doing business in Arizona, either directly or through a contractor, from discriminating against any person based on political affiliation, social credit, ESG, or similar value-based or impact criteria.

■ Does not apply if the financial institution offers investments, products, or services that include subjective standards that are fully disclosed and explained to the potential customer or investor before entering into a contract.

SB1500: Government Investments; Fiduciaries; Pecuniary Benefit

Introduced, but did not pass in the 2023 legislative session

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Requires that all state investments be made in the sole interest of the beneficiary taxpayer. Requires a fiduciary of a state plan to consider only pecuniary factors when evaluating an investment or discharging duties with respect to a plan.

■ Requires the shares held directly or indirectly by a state plan to be voted only in the pecuniary interest of the plan and not to further non-pecuniary, ESG-related, or other benefits or goals.

■ Requires the state treasurer to post and update a current list of state investments and their investment managers.

SB1611: Public Entities; Contracts; Prohibition

Introduced, but did not pass in the 2023 legislative session

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Prohibits a public entity from conditioning, entering into, or renewing a contract with a company based on the fact that such company implements an ESG Standards Policy.

■ Prohibits a public entity from adopting a procurement, investment, or other policy that induces or requires a company to implement an ESG Standards Policy.

■ An "ESG Standards Policy" means a business policy that furthers any of the following: (i) an international, domestic, or industrial agreement relating to an environmental or social goal; (ii) a corporate governance structure based on social characteristics or a social or environmental goal.

HB2471/SB1139: Government Investments; Plans; Fiduciaries; Products

Introduced, but did not pass in the 2023 legislative session

Legislation

Restrict Use of ESG Factors; Focus on Pecuniary Characteristics

■ Authorizes the state treasurer to maintain a list of state investments. Requires all state investments to be made in the sole interest of the beneficiary taxpayer. Prohibits the state treasurer from taking unnecessary investment risks or promoting non-pecuniary benefits or other non-pecuniary social goals.

■ Requires a fiduciary to discharge its duties with respect to a plan solely in the interest of the participants and beneficiaries of the plan for the exclusive purpose of providing pecuniary benefits to the participants and beneficiaries. Prohibits any non-pecuniary or other factors when evaluating an investment.

■ Requires that the shares held by a government investment plan be voted only in the pecuniary interest of the plan and not to further non-pecuniary, environmental, social, political, ideological, or other benefits or goals. Requires that a plan may not entrust any plan assets to a fiduciary that has a practice of engaging with or commits to engaging with a company based on non-pecuniary factors, or has a practice of voting shares based on non-pecuniary factors. Prohibits a fiduciary from adopting a practice of following the recommendations of a proxy advisory firm or other service provider, unless the proxy advisory firm's or the service provider's proxy voting guidelines are consistent with the fiduciary's above obligation.

SUBSEQUENT DEVELOPMENTS

■ SB1139 did not pass the House and was being reconsidered on 4/5/2023.

SB1096: Firearms; Contracts; Prohibited Practices

Introduced, but did not pass in the 2023 legislative session

Legislation

Target Entities that Boycott Certain Industries

■ Prohibits state public entities from entering into a contract with a company for the purchase of goods or services worth at least $100,000 unless the company verifies in writing that it does not discriminate against firearms entities or trade associations and will not do so during the contract term. Applies to companies with 10-plus full-time employees. 

HB2656: Certain Affiliations; Discrimination Prohibited; Statewide Concern

Introduced, but did not pass in the 2022 legislative session

Legislation

Prohibit Discrimination on Basis of Social Credit or ESG Scores

■ Prohibits financial institutions doing business in Arizona from discriminating against persons based on political affiliation and other social credit, ESG-related, or similar values-based or impact criteria.

HB2473: Firearms; Contracts; Prohibited Practices

Introduced, but did not pass in the 2022 legislative session

Legislation

Target Entities that Boycott Certain Industries

■ Prohibits public entities from signing contracts worth $100,000 or greater with a company unless the contract includes a written certification that the company does not currently, and agrees for the duration of the contract not to, discriminate against a firearms entity.