ESG rules shouldn’t make it harder for advisors to do business

Over the last year or so, lawmakers and state regulators across the country have introduced a series of ESG-related proposals that could have profound ramifications for the industry. Not surprisingly, politics has been a driving force, with policymakers in blue states introducing measures promoting ESG investing and those in red states combatting the trend.

At the Financial Services Institute, we take a constructive, nonpartisan approach to advocacy. But we will push back hard against rules and regulations that make it more difficult for our members to do business and limit Americans’ access to financial advice — which is what will happen if the recent proposals, and others yet to be introduced, go into effect. 


For example, last year, California lawmakers considered legislation that would have imposed onerous and unclear annual reporting requirements related to greenhouse gas emissions. FSI opposed the bill at the time, helping to defeat it narrowly. Unfortunately, a similar version is back up for debate. 

Supporters claim the proposal’s scope is limited, maintaining that it applies to only a handful of large corporations. In practice, though, any enterprise with more than $1 billion in revenue that does any business in the state would have to report all its greenhouse gas emissions, even those that occur outside of California.

Moreover, businesses would also be obligated to report the emissions of downstream companies, including suppliers. Many question whether such a task is possible. Even if it is, it would invariably result in double-counting, since many companies use the same suppliers. 

Overall, the proposal is onerous, overly burdensome and would make it more difficult for many financial advisors to do business in the state. We helped thwart it last year and will work just as hard this time to win the same outcome.


In another instance, Missouri earlier this year issued a rule requiring advisors to provide notice to and obtain written consent from a client whenever “social” or nonfinancial objectives factor into a recommendation or discretionary decision to buy or sell a security. At the time, we joined a coalition of pro-business groups opposing this regulation.

In engaging regulators in the state, we pointed out that the ensuing administrative burdens could significantly impact the ability of financial advisors to operate efficiently and serve Missouri clients. We also noted that the rule is unnecessary. After all, under Reg BI, advisors are required to act in their client’s best interest. Despite those objections, Missouri finalized the rule in late July. 

Against this backdrop, Wyoming recently unveiled proposed amendments to state securities laws that would impose similar disclosure and consent requirements on firms and advisors. Those promise to be equally onerous and unnecessary. We are concerned that more states will follow suit.


Are ESG investments good or bad? That should be for investors and their advisors to decide among themselves because politicians and regulators should not be unduly favoring or burdening particular vehicles.

We work hard to put politics aside when we advocate for the industry. Indeed, our focus is on making it easier for financial advisors — including thousands of our members nationwide — to help their Main Street clients plan and save for retirement, their children’s education or whatever their financial goals may be.

To that end, we call on every regulator and politician to consider these things before issuing rules or proposing legislation that impacts the industry. 

Dale Brown is president and CEO of the Financial Services Institute.

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