Wyoming’s attempt to interfere with investment strategies

With the 2025 state legislative sessions looming, Wyoming is now added to the list of states that are apparently willing to burden taxpayers and retirees simply to score political points.

On January 2, the “Stop ESG-State funds fiduciary act”, was filed in the Wyoming House of Representatives. Like legislation in other states, WY House Bill 80 would prohibit investment firms accused of considering environmental, social, and governance (ESG) factors from investing state funds. This bill is one of five key bills for the Wyoming Freedom Caucus in their “Five and Dime Plan” (five bills in the first 10 days of the 2025 general session).

But, as other states have realized, blacklisting firms through legislation like this comes with a risk of decreasing revenues that reduces the corpus of the state’s retirement and other funds, leaving it to taxpayers to make up the difference.

The Wyoming Retirement System estimated this legislation would reduce revenue for the state’s pension funds by $193 million in fiscal year 2026, $387 million in 2027, and $580 million in 2028. In other words, many of the state’s elected officials are willing to sacrifice nearly $1.2 billion over the next three years to scratch a political itch.

The State Treasurer’s Office, which oversees the state’s Loan and Investment Board, did not provide an estimate of revenue losses. They did, however, join the state’s retirement system in admitting, “this legislation would result in decreasing revenues, primarily as a result of a smaller universe of investment managers willing to partner with Wyoming to provide investment opportunities.”

It is not in the best interest of the state, its retirees, or its taxpayers to forgo free market principles by limiting competition.

Numerous studies and state fiscal notes have shown costly impacts from anti-competition/anti-ESG laws, including Texas, Oklahoma, Indiana, and others. In some cases, judges have stepped in to curtail overreach by elected officials.

In late October, a state judge in Oklahoma found the state’s anti-ESG law, similar in many ways to Wyoming’s recently filed bill, violated the state’s Constitution. In Missouri, a federal judge issued a permanent injunction striking down the state’s anti-ESG regulations. In Texas, a federal lawsuit has been filed claiming the state discriminates against investment firms they’ve blacklisted and denied those companies due process, violating the First and Fourteenth Amendments.

The action taken by some of Wyoming’s lawmakers should not come as a surprise given that Wyoming recently joined other states in a lawsuit against three of the largest fiduciaries.

Led by Texas Attorney General Ken Paxton, the suit accuses BlackRock, State Street Corp., and Vanguard Group of using their index and other broad fund holdings to seemingly collude  in an effort to reduce coal production for the purpose of meeting net-zero carbon emissions while increasing the price of coal.

This new effort by Wyoming’s lawmakers to push for a ban of targeted investment professionals is not in the best interest of Wyomingites. Unlike investment professionals, legislators are not required to follow the fiduciary principle of maximizing returns for the benefit of the state’s retirees and taxpayers. We’ve seen these bills play out poorly in other states – both in lost funds and lengthy litigation.

Wyoming has always been business friendly and a strong supporter of the free market. House Bill 80 would break that tradition. The Cowboy State should take a lesson from other states and leave the investing to the free market and professionals that know it best, their taxpayers and retirees will thank them for it.