Virginia AG Advises Against ESG Investments in State Retirement Fund

Virginia Attorney General Jason Miyares has issued a nonbinding legal analysis advising the state’s retirement system to refrain from prioritizing environmental, social, and corporate governance (ESG) issues in its investment decisions. Miyares emphasized that the Virginia Retirement System (VRS) should focus solely on securing the best financial outcomes for its beneficiaries, which include state employees and public school teachers. He stated that investment choices should be based on sound economic principles rather than influenced by what he termed "unfounded ESG fads." In his advisory opinion, requested by Republican Delegate Nick Freitas, Miyares reinforced the legal obligation of the VRS board of trustees to make objective investment decisions, free from social or political pressures. He argued that ensuring secure financial futures necessitates a commitment to sound economic practices. This stance comes amid a growing trend among some state pension programs to adopt ESG investing strategies. Virginia Retirement System spokesperson Virginia Sowers clarified that the system does not currently have a policy favoring ESG investments. She noted that VRS adheres to its fiduciary duty by analyzing economic factors and assessing monetary risks to maximize returns over the long term. In contrast, other states like Illinois and Maryland have mandated considerations of sustainability in investment decisions, while states such as Florida and Indiana have enacted legislation against ESG investing. Despite previous legislative attempts in Virginia to restrict fossil fuel investments, including a 2022 bill that did not pass, Miyares' recent opinion marks a significant moment in the ongoing debate over the role of ESG factors in public pension fund management. This memo is Miyares' tenth opinion issued in 2024.