The growing popularity of ESG investing has triggered a backlash in the other direction.

There is growing vociferous resistance against companies with environmental, social and governance (ESG) investment strategies, under the presumption that such strategies harm local industries and deliver subpar returns for investors.

In the US, 17 conservative-leaning states have introduced at least 44 bills to penalize companies with ESG policies this year, up from the roughly dozen pieces of legislation introduced in 2021, Reuters reports. And the momentum only continues to grow, as 19 state attorneys general have asked the US Securities and Exchange Commission whether companies have put their ESG policies before fiduciary responsibilities.

However, this concerted, ideologically driven effort relies on a false equivalency, notes Witold Heinsz, vice dean and faculty director of the ESG Initiative at the University of Pennsylvania’s Wharton School of Business. “With $55 trillion in assets under management, how is climate risk not a business issue?”

A recent study conducted by Daniel Garrett, an assistant finance professor at the Wharton School, and Ivan Ivanov, an economist with the Board of Governors of the Federal Reserve, found that Texas communities are paying an estimated $303 million to $532 million in interest for the first eight months since a law that went into effect on September 1, 2021.

The state law prohibits local jurisdictions from contracting with banks with ESG policies deemed harmful to the Lone Star State’s oil, natural gas and firearms industries. As a result, communities could not turn to Bank of America, Citi, Fidelity, Goldman Sachs or JPMorgan Chase, which underwrite 35% of the debt market. “If you decide not to go to the big banks that consider climate risk a significant business risk, you are left going to smaller banks that charge more,” says Heinsz.

Meanwhile, billionaire investors like Peter Thiel and Bill Ackman have backed anti-ESG investment options such as the Strive US Energy exchange-traded fund, which seeks to disconnect energy companies from climate concerns and began trading in August.

“Go back 20 to 30 years, some investors were willing not to invest in defense-related companies like the ones that produce land mines,” says Heinsz. “Now there are investors on the right who are not interested in a business case.”