On Wednesday, Rep. Neal Jackson, R-Moore, introduced the Farmers Protection Act (HB 62) in the North Carolina House of Representatives. The bill protects farmers from financial discrimination based on the of use of ESG (Environmental, Social, and Governance) practices. The bill’s co-sponsors are Rep. Jennifer Balkcom, R-Henderson, Rep. Jimmy Dixon, R-Duplin, and Rep. Karl Gillespie, R-Macon.
“Agriculture is one of the most crucial industries to the North Carolina economy,” Jackson told the Carolina Journal. “Unfortunately, farmers in our state have encountered challenges obtaining financing by some of the larger lending institutions who have determined that farming does not align with their organization’s carbon or social goals. The Farmers Protection Act ensures that there is no discrimination against NC farmers based upon a radical ESG philosophy.”
ESG practices promote environmental sustainability and purported societal and governance benefits, but climate regulations are often what drive these practices. Bill sponsors hold that ESG practices create real problems for farmers, including rising prices and smothering innovation.
“It is unlawful for any bank to deny or cancel service to any agriculture producer based, in whole or in part, upon the agriculture producer’s greenhouse gas emissions, use of fossil-fuel derived fertilizer, or use of fossil fuel-powered machinery,” reads the bill. “If a bank has made any ESG commitment related to agriculture, there is a rebuttable presumption that the bank’s denial or restriction of service to an agriculture producer violates this section. A bank may overcome this rebuttable presumption, by demonstrating through clear and convincing evidence, that it’s denial or restriction of a service was based solely on documented financial considerations rather than an ESG commitment.”
“The Farmers Protection Act would extend its anti-discrimination provisions beyond traditional banking institutions,” said Kelly Lester, policy analyst for the Center for Food, Power and Life at the John Locke Foundation. “The bill would explicitly apply its restrictions to state savings banks, state associations, and credit unions. These entities would have to adhere to the same compliance requirements and be subject to enforcement measures outlined in the legislation. By covering a broad range of financial institutions, the act would ensure that all farmers, regardless of where they bank, received equal protection against ESG-based financial discrimination.”
Experts have indicated ESG frameworks often pressure investors and financial institutions to avoid financially backing high-carbon projects such as livestock farming. Capital is diverted away from these farms, especially cattle farms, as ESG activists target such farms due to their methane emissions.
But farmers cannot modernize their operations, adopt sustainable practices, or expand their businesses without sufficient capital.
“When applied to agriculture, ESG principles drive restrictive policies and financial practices that penalize farmers for operating in ways that have sustained the sector for generations,” wrote Lester. “These include requirements to reduce emissions, adopt renewable energy, and avoid certain farming practices deemed environmentally harmful. The real-world application of these goals burdens farmers with excessive costs and compliance requirements, often with little respect for the unique challenges of agriculture.”
ESG investing directs capital toward high scoring companies and projects that meet specific environmental, social, and governance criteria. In theory, these criteria encourage businesses to adopt environmentally sustainable practices, such as promoting diversity and enhancing governance structures, according to experts.
At issue is the definition of “sustainable,” which can vary depending on the agency making the evaluations. However, success metrics often emphasize environmental and social objectives over economic viability, making it less likely for companies that fall short of these goals to receive investment funding.
“Agriculture is the backbone of North Carolina’s economy, and our farmers rely on fair and consistent access to financial services to operate their businesses,” Balkcom, a bill sponsor, told the Carolina Journal. “This bill is essential because it protects agricultural producers from being denied banking services based on ESG (Environmental, Social, and Governance) commitments rather than financial merit. The bill promotes transparency by requiring banks to certify compliance annually and provides enforcement measures to hold financial institutions accountable. This legislation sends a clear message that North Carolina values and supports its agricultural community by prioritizing fairness in financial access.”
ESG policies present challenges to farmers by introducing new costs that exacerbate challenges such as weather, pest infestations, and market fluctuations. Nonetheless, there are no corresponding benefits to offset the challenges, says Lester.
“Europe provides a cautionary tale for ESG agricultural policies,” writes Brooke Medina, vice president of communications at the John Locke Foundation. “Aggressive climate policies in the Netherlands have driven many farmers to the brink of bankruptcy, with the possibly disastrous consequences of food shortages and economic collapse. This should serve as a warning for US policymakers, that ESG regulations could lead to the same dire outcomes.”
A prominent example of these challenges is the significant pressure on farmers to reduce greenhouse gas emissions and adopt green technology. These changes, however, require steep upfront investments and can often increase costs by as much as 34%. While large operations can absorb these costs, small to midsize (usually family-owned) farms find these costs prohibitive.
ESG policies often target fertilizer usage due to its contributions to greenhouse gas emissions and water pollution. However, fertilizer is essential to high-yielding crops and affordable grocery store prices. Reducing the use of fertilizer without viable alternatives not only hurts the consumer by contributing to rising prices and hurts the farmers by cutting their profits, say critics.
“As a strong supporter of North Carolina’s farming community, I believe this legislation is necessary to prevent financial discrimination and to ensure that farmers can continue to do their vital work without unnecessary restrictions,” concluded Balkcom. “I will continue to advocate for policies that protect and strengthen our agriculture industry.”