Gas Guns and Governments: Financial Costs of Anti-ESG Policies

Daniel Garrett () and Ivan T. Ivanov
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Daniel Garrett: https://fnce.wharton.upenn.edu/profile/danielgg/#research

No WP 2023-07, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: We study how regulation limiting ESG policies distorts financial market outcomes. In 2021 Texas enacted laws that prohibit municipalities from contracting with banks with certain ESG policies, leading to the exit of five of the largest municipal bond underwriters from the state. Issuers previously reliant on these underwriters face higher uncertainty and borrowing costs since the enactment of the laws. These effects are consistent with a deterioration in underwriter competition as issuers face fewer potential underwriters. Texas issuers will incur $300- $500 million in additional interest on the $31.8 billion borrowed during the first eight months following enactment.

Keywords: ESG; Public Finance; municipal bonds; Banking Competition (search for similar items in EconPapers)
JEL-codes: G24 G28 H74 (search for similar items in EconPapers)
Pages: 71
Date: 2023-01-02
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (2)

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