The Idaho House State Affairs Committee endorsed three bills that would substantially restrict the state from doing business with companies that operate based on environmental, social and governance standards.

A company or investment fund may base decisions on ESG considerations such as how an enterprise or industry protects the environment or helps to combat climate change. How the business handles its personal and social relationships — such as with employees and customers — and its corporate governance practices are among other factors.

Agriculture and natural resource industries, key contributors to the state’s economy, have generated ESG-related concerns and would benefit from the legislation, the proponents said. The committee on Feb. 27 voted to send all to the full House with do-pass recommendations.

The legislature last year passed Senate Bill 1405, which says ESG standards cannot override traditional prudence rules when public entities invest. But House Conurrent Resolution 52, which described ESG scoring and its detrimental impacts on the state’s businesses, failed in 2022.

Lawmakers will continue to work on the issue, which is “real” and “affecting industries in Idaho right now,” said Rep. Barbara Ehardt, R-Idaho Falls.

Risks include limiting opportunities for commercial and service-provider relationships, particularly where a business or person has only a distant tie to such policies, said Rep. Brooke Green, D-Boise.

House Bill 189 would prohibit public contracts with companies that boycott certain business sectors. HB 190 would require that banks and credit unions holding state funds not boycott certain industries based on ESG goals. HB 191 would disallow basing contracting and procurement decisions on ESG standards.

The Idaho Farm Bureau Federation supported the bills. For example, HB 190 sets a clear policy, includes reasonable exceptions, and helps protect industries that are “the backbone of the Idaho economy” and “need to remain resilient for the future,” said Braden Jensen, governmental affairs director.

HB 190 would substantially expand the powers and duties of the state treasurer while creating a “naughty-nice list, said Idaho Conservation League spokesman Jonathan Oppenheimer, who opposed it.

As for HB 189, it is a “misguided reaction to ESG that will result in severe consequences for Idaho taxpayers,” he said. It would destabilize financial markets — contributing to higher borrowing costs for municipalities and others — amid a patchwork of state legislation for and against ESG and boycotts.

The Idaho Association of Commerce and Industry opposes HB 189. Some language is too broad, making it unworkable, President Alex LaBeau said. And the text refers to existing state appeal processes without spelling out a specific process — which could result in “endless appeals” and related high costs.

HB 189 prohibits public contracts with companies that are boycotting certain industries, according to its purpose statement. The text lists fossil-fuel energy exploration and production, nuclear energy, hydroelectric power, agriculture, timber, minerals and firearms.

HB 190 aims to ensure that banks and credit unions designated by the state treasurer as depositories for public money do not boycott industries important to the state and its citizens’ livelihoods. Institutions could get an exemption if it is in the best interest of the state, such as in a rural area with limited depository bank options, Treasurer Julie Ellsworth said.

HB 191 would restrict the state from using ESG criteria in evaluating contract bids. Contract awards, including for public works projects, would be required to be based on competitive pricing and contractor qualifications, and the state could not consider “unrelated, subjective ethical or sustainability criteria when determining whether a contractor is qualified of a bid is awarded,” the purpose statement says.

It aims to create a level playing field for contract bidders, said Rep. Jason Monks, R-Meridian.