The Treasury Department has warned that state laws limiting banks from considering environmental, social, and governance (ESG) factors could negatively impact efforts to combat money laundering and terrorism financing.

A letter sent to lawmakers highlighted a Florida law signed by Gov. Ron DeSantis in May, which deems it “unsafe and unsound” for banks to factor in non-financial considerations.

The Treasury Department’s letter argues that such laws create uncertainty and could hinder national security measures.

DeSantis and other conservative Republicans have criticized ESG standards as discriminatory and detrimental to businesses, aiming to protect conservative groups and industries.

Tennessee has enacted a similar law, and several other states are considering similar measures, the Associated Press has reported.

The Treasury cautioned that these state laws might compromise federal efforts against criminal and terrorist activities.

Written by B.C. Begley