Fund managers have been riding the wave of positive sentiment toward environmental, social and governance (ESG) investing under the premise that they can “do well by doing good.” That notion has come under fire of late, however, amid the intense politicization of ESG investing. Although long-simmering below the surface, the issue has reached a crescendo, as a number of state-level politicians and lawmakers – predominantly in conservative states – have pursued legislation and other measures to prohibit state pension plans from investing with managers that consider ESG factors. As the anti-ESG movement escalates, fund managers are unable to remain ambivalent and unaffected on the sideline. Pensions plans from dozens of states – many of which are anchor or seed investors – may be forced to immediately withdraw from their existing private fund investments. Further, fund managers will likely be subject to intense scrutiny about their ESG stances and efforts, while also potentially being forced to decide whether to position themselves for investments from pension plans from conservative or liberal states. In a guest article, Arnold & Porter attorneys Ellen Kaye Fleishhacker and Peter Gioello evaluate the legal developments behind the anti-ESG movement and the potential ramifications for fund managers. Specifically, the article outlines the scope and form of anti-ESG efforts in various states; the U.S. Department of Labor’s role in the confusion; and recommendations for fund managers and state pension plans to prepare themselves going forward. See “Ways CCOs Are Approaching ESG in Light of Growing SEC Scrutiny” (Feb. 22, 2022).