April 5, 2023

Limiting ESG impacts in North Dakota

Topic: Issues

This excerpt from last week's Straight Talk podcast has been edited for clarity. To listen to the entire podcast, click here.

Host Emmery Mehlhoff: Welcome to Straight talk with NDFB. Today, I have Representative Anna Novak with me to talk about ESG issues. But before that, Representative Novak, why don't you go ahead, tell us about yourself, about your district and how you got involved and ran for the Legislature.

Rep. Novak: Oh, absolutely. Thank you so much for having me on today. I represent District 33, which is all of Mercer County, all of Oliver County, parts of Morton, and parts of McLean. Essentially, it's all of coal country.

I got involved in politics about three years ago. I'm co-founder of an organization called Faces of North Dakota Coal. It is a grassroots advocacy group and our goal is to humanize the people who work in the coal industry. For the last decade or so, there's been negative connotations coming at the national level from the EPA and parts of the federal government. The people that work in the coal industry that I know, my dad, my brother, my husband now does, and most everyone in my district is affiliated with the coal industry in some way, shape or form. These people are the salt of the earth. A lot of the people who work in the coal industry also farm and ranch on the side.

Emmery: Let's dive into this topic of ESG. So it's kind of a buzzword right now. Can you tell us what ESG is and some of the implications of it?

Rep. Novak: ESG is meant to be a framework within an organization to focus on environmental, social and governance issues. It's essentially put in place to encourage companies to “do the right thing” and invest in companies that want to reduce their carbon emissions and act in a way that is viewed by society to be socially responsible. Publicly invested companies are evaluated and given scores based on applying those ESG practices within their organization. For instance, companies purchase renewable energy credits or hire a diverse workforce to increase their ESG score.

Emmery: Where did this framework come from? There's obviously a general movement nationally to push these “feel good” things where it’s really more idealism than helping people or the environment. How has ESG become something that companies feel bullied into adopting?

Rep. Novak: It really does come from liberal minded organizations. What happens with some of these organizations is publicly traded companies sell shares and you can buy them on the stock exchange. As soon as you become a shareholder, you're considered to be an owner of the organization. There have been companies that have had environmentalists that have gotten to be on the board of directors, and they've been able to infiltrate these companies into adopting these sorts of standards. I think the way that they look at it is if they can come together in a global system and push these ideas, they're in control of opportunities for power and wealth accumulation within the companies, and they can push their agendas through. It's amazing, this framework has been taking place for at least the last decade, and they've been pretty sneaky in the way that they've gone about it.

Emmery: Your bill, House Bill 1429, is a conglomeration of several ESG bills that were proposed at the beginning of this session. Can you dive a little bit more into what it will do to help address this problem of the ESG framework?

Rep. Novak: I did have three ESG bills at the beginning of session, but HB 1429, like you say, groups all of them together and puts it under one bill. The bill basically does four things:

  1. Codifies our law to prohibit State Investment Board dollars from being invested in companies that have ESG as their end goal.
  2. Covers the insurance sector. Fossil fuel companies are struggling to get insurance companies to cover them. It’s not based on accidents that are typically factored in with insurance premiums. They are being discriminated against just because they are fossil fuel companies and their premiums have pretty much doubled.
  3. Adds language that applies to state entities that invest public funds and it also adds proxy voting requirements. Essentially it makes it so if you represent or invest the assets for the state of North Dakota, then you must invest and vote according to policies that don't damage our key industries of energy and agriculture. These proxy voting services will be actively monitored just to make sure that the proxy voting companies don't breach our state policies.
  4. Provides a study during the interim to evaluate the level of involvement North Dakota has with companies that use ESG criteria when doing business or investing. This study will give us an idea of whether or not we need additional legislation to fight back even further against ESG.

Emmery: You mentioned other states are already implementing legislation to address ESG. Are we seeing some positive things coming out of these states?

Rep. Novak: Yes. For example, West Virginia passed a law where they essentially came up with a list of banks that have been known to implement ESG. I think it started off with seven banks. In the last couple of months, two of the banks have walked back and said, "It's kind of hurting our pocketbooks and so we are no longer going to be factoring in ESG." Vanguard is one of those. You can see how they law is making a difference.

Emmery: I think it is significant North Dakota is taking a stand on this. North Dakota citizens value agriculture and energy and that needs to be represented by the legislature. Taking a stand to say, “Hey, we're not going to put up with this kind of framework being imposed," is truly representing the citizens of your state.

Rep. Novak: Well, thank you. Energy and agriculture are North Dakota's largest industries. They employ thousands of people, and we have a responsibility to our citizens to protect their livelihoods.

Emmery: Thank you Rep. Novak for visiting with me today.