The North Carolina Senate voted 19-18 on Tuesday to pass House Bill 570, which prohibits the state and pension plan fiduciaries from investing based on climate change considerations. The bill now goes to Governor Roy Cooper for passage or veto.

According to the bill, the state is not allowed to consider “environmental, social, and governance” (ESG) criteria to screen potential investments. The bill also prohibits the state from using ESG criteria to hire, fire or evaluate employees and granting awards for state contracts. The state treasurer also cannot consider ESG factors when making investment decisions.

In addition to the state, pension plan fiduciaries are prohibited from considering ESG investment factors and can only consider “the pecuniary interest of the participants.” These fiduciaries are allowed to consider ESG data only if the data presents economic opportunities that “qualified professionals” would treat as “material economic considerations under generally accepted investment theories.” If passed, the state attorney general will enforce the law.

The bill defines “pecuniary factor” as “a factor that has a material effect on the financial risk or financial return of an investment based on appropriate investment horizons consistent with the plan’s investment objectives and funding policy.” In contrast, the bill defines “non-pecuniary” as “any action taken or factor considered by a fiduciary with any purpose to further environmental, social, or political goals.”

ESG investment criteria have been subject to several recent controversies. Earlier this year, President Joe Biden vetoed federal legislation that would have overturned a Department of Labor rule that allows retirement fund fiduciaries to consider ESG factors. In May, Florida Governor Ron DeSantis signed a similar bill that limited ESG considerations for the state and fiduciaries.