A U.S. federal court has blocked Missouri’s regulation that restricted financial professionals from considering environmental, social, and governance (ESG) factors in their investment advice. The court ruled the regulation as unconstitutionally vague, finding it overly broad and unclear.
Introduced by Missouri Secretary of State Jay Ashcroft in 2023, the rule required financial advisors to obtain written consent from clients before incorporating nonfinancial objectives—such as social or environmental goals—into investment recommendations. The consent had to include language acknowledging that these objectives may not maximize financial returns.
Missouri has been a vocal participant in the Republican-led anti-ESG movement, which aims to reduce the influence of ESG factors in investing. The state’s actions include pulling funds from BlackRock and joining a multi-state coalition led by Florida Governor Ron DeSantis to oppose ESG policies.
The Securities Industry and Financial Markets Association (SIFMA) challenged the rule, arguing that it could also encompass financial objectives like tax considerations and diversification, causing confusion.
District Judge Stephen Bough agreed, issuing a permanent injunction against the regulation and noting that the penalties for noncompliance were severe, ranging from fines to criminal penalties. Following the ruling, SIFMA CEO Kenneth E. Bentsen, Jr. called the decision a “major victory” for both the securities market and investors, emphasizing that existing federal laws already ensure that financial professionals act in their clients’ best interests.
In a statement issued following the ruling, SIFMA President and CEO, Kenneth E. Bentsen, Jr., said that the decision “marks a major victory not only for our national securities market system, but also for our nation”
