LITTLE ROCK, Ark.— A bill that passed as amended through the Arkansas Senate would make the state divest from financial companies that follow certain sociopolitical guidelines. The sponsor says the state would be making a statement by passing it.

The financial groups in question follow Environmental, Social, Governance (ESG) obligations, a set of rules that dictate contracting based on social issues. For example, some refuse to work with fossil fuel and firearm companies on principle.

“If those companies are pushing their political agenda through businesses, we’re not going to tolerate it,” State Sen. Ricky Hill, the bill’s sponsor, said. “If they do not discriminate, there will be no issue whatsoever.”

University of Arkansas economist Jeff Cooperstein said this could impact state pension and retirement funds. A federal reserve economist’s study shows Texas lost out on hundreds of millions of dollars after divesting from some ESG companies, and taxpayers made up the difference.

“The retirement system’s number one rule is to maximize their benefits for their members,” Cooperstein said. “If you’re telling them you can’t make a choice that’ll give you more revenue than less, then that’s definitely a cost.”

Cooperstein said it will be up to the state to find companies that have the same rate of return as companies that follow ESG guidelines. A list of said companies would be drafted by the state treasurer if this becomes law, Hill said.

“There’s no opportunity to cause loss [if suitable replacements are found],” Cooperstein said.

The state is required to pay out pensions in full regardless of their rate of return, Hill said, so most state retirement plans would not be impacted. If that happens, other lawmakers like State Sen. Jimmy Hickey pointed out that the state would have to use other funds raised by taxpayers to make up that difference.

“I agree from a political standpoint, but that’s not what we need to be looking at in this case,” Hickey said.

Hill said he is certain substitute groups could be found, and he said this is about the state making a moral decision.

“Sometimes, you have to take a stance on what you believe in,” Hill said.

The bill passed through the Senate as amended and went before the House committee Wednesday. If it passes there, it will go before the full House chamber Thursday.