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Can Anti-ESG Policy Protect Targeted Industries from Divestment?

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  • Jonah J. Allen

    (Colorado School of Mines
    The Jain Family Institute)

Abstract

This study examines the efficacy and implications of state-level anti-Environmental, Social, and Governance (ESG) policies by investigating the impact of Texas’s anti-ESG policy on oil and gas (O&G) drilling activity through a difference-in-regression-discontinuity design comparing the Texas and New Mexico Permian. I find that the policy had no significant effect on new drilling activity, a key indicator of the long-term success of the state’s O&G sector. This suggests that banks did not respond to the policy by adapting shorter-duration lending behavior, which has been subject to industry-wide changes in recent years and is particularly relevant to regulators seeking to protect O&G investment within state borders. The paper highlights the need for further research into firms’ response to anti-ESG policy, which may be unsuccessful in its aims to protect state industry or influence banks to adapt lending behavior. This research contributes to the nascent literature on anti-ESG policies in the United States.

Suggested Citation

  • Jonah J. Allen, 2025. "Can Anti-ESG Policy Protect Targeted Industries from Divestment?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(5), pages 1435-1477, May.
    • Handle: RePEc:kap:enreec:v:88:y:2025:i:5:d:10.1007_s10640-025-00971-5
    DOI: 10.1007/s10640-025-00971-5
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    More about this item

    Keywords

    ESG policies; Anti-ESG; Oil and Gas; Permian Basin; Reserve-based lending;
    All these keywords.

    JEL classification:

    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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