In this week’s edition of Economy and Society:
- Connecticut treasurer race centers on ESG investing
- New York becomes first state to impose moratorium on data center construction
- Pennsylvania requires data centers to disclose energy and water use
- California teachers pension invests $2 billion in clean energy infrastructure
- ESG legislation update
- EU eases carbon pricing requirements to aid heavy industry.
In the states
Connecticut treasurer race centers on ESG investing
What’s the story?
The Connecticut treasurer race has made environmental, social, and corporate governance (ESG) investing the central issue. Democratic incumbent Erick Russell, who is seeking a second term, defends using ESG when managing the state's approximately $69 billion in public pension assets. Republican challenger Fred Wilms opposes the approach.
Russell said using an ESG approach is "part and parcel with driving strong returns on long-term investments." He cited efforts to reduce greenhouse gas emissions and improve board diversity in the state's investment portfolio.
Wilms, a former state representative, said that "If we start to bring in social or political considerations, we're moving away" from the key responsibility of providing "the most secure retirement future" for pensioners. Wilms calls for an investment board to share fiduciary duties with the treasurer, a proposal Russell and Gov. Ned Lamont (D) opposed last year.
Click here to learn more about the six public pensions in Connecticut.
Why does it matter?
Russell has pointed to three years of double-digit returns, with the fund in the top 17% of all public pension funds in 2025, as evidence that using ESG factors alongside financial metrics improves performance. He claims this is a turnaround after a decade of underperformance. Russell attributed these gains to structural changes and his investment team's work, though he acknowledged a strong stock market played a role.
Russell cited pressuring American Pacific to shut down 12 coal plants and retrain workers as proof his strategy works. He said his office gained "a seat at the table to actually drive that change." Wilms disagreed, stating that "You don't need to look at it through the ESG perspective. It's pretty obvious that coal is being downsized in the U.S."
What’s the background?
Connecticut law allows the state treasurer to consider ESG factors when managing pension assets. The state treasurer is responsible for managing public employee retirement funds and other state investments. Russell has expanded the use of ESG investments since taking office in 2023.
The race reflects a nationwide debate over ESG and public pension management. The Department of Labor submitted a proposed rule on June 30, 2026, to restrict plan fiduciaries from prioritizing ESG when selecting investments. The rule reversed guidance by the Biden administration.
New York becomes first state to impose moratorium on data center construction
What’s the story?
New York Gov. Kathy Hochul (D) signed an executive order on July 14, 2026, imposing a one-year moratorium on construction of large data centers, becoming the first state to halt such development. The moratorium applies to hyperscale data centers — facilities designed to support AI and cloud computing — that consume 50 megawatts of energy or more.
During the pause, New York will create a regulatory framework to evaluate how data centers affect the environment, energy demand, water use, air quality, noise levels, and local communities. The order directs the Department of Public Service to conduct a formal Generic Environmental Impact Statement to evaluate these impacts.
According to the governor, the moratorium does not apply to small-scale operations hosting medical research, education programs, or other facilities "that pose little or no threat to their communities." Hochul said, "As data center development threatens to hike up utility bills, deplete our natural resources, and create uncertainty for New Yorkers, it's my responsibility to take action and lead." She said, "New York will lead the way in creating the strongest standards in the nation for data center development."
Why does it matter?
Data center electricity consumption in the United States is projected to grow 300% over the next decade and account for nearly 38% of net electricity consumption through 2037, according to the National Electrical Manufacturers Association. In New York, approximately 12 gigawatts (GW) of data center load requests are pending in the New York Independent System Operator interconnection queue as of May 2026. More than eight GW entered the queue in 2025 alone.
Hochul's order creates a Community Investment Framework to help localities negotiate directly with data center developers for community investment funds, local infrastructure improvements, prevailing wage standards, and workforce development. The state will also consider establishing a New York Grid Acceleration Fund requiring data centers to contribute capital for grid improvements and clean energy procurement.
However, infrastructure experts say the moratorium may not address underlying demand. Balaji Tammabattula, founder of infrastructure company BaRupOn, said, "Pausing data centers doesn't pause the demand for AI. That compute still gets built, just somewhere else, and often on a grid that's dirtier than New York's."
Pennsylvania requires data centers to disclose energy and water use
What’s the story?
Pennsylvania Gov. Josh Shapiro (D) signed a budget on July 12 that requires data centers operating in the state to submit annual reports on their energy and water consumption to the Department of Environmental Protection. The reporting requirement, included in HB 1924, takes effect on July 1, 2027.
Pennsylvania will require data centers with peak electrical demand of 10 megawatts or greater to disclose:
- total energy consumption by month and source,
- estimated average energy usage during peak load,
- total water consumption by month and source,
- measures undertaken to reduce emissions or improve efficiency, and
- measures to generate on-site or off-site renewable electricity and recover waste heat.
Data centers failing to comply face civil penalties of $10,000 per day until submission.
The budget also requires the PJM Interconnection, the regional grid operator serving Pennsylvania and 12 other states, to provide the Pennsylvania Public Utility Commission (PUC) with additional oversight of demand forecasting. The PUC also gains authority to review and validate utility load forecasts submitted to PJM and coordinate with other state regulators to prevent duplicative counting.
Why does it matter?
Data center development has accelerated significantly in Pennsylvania. PPL Electric reported in May that its data center pipeline (the capacity it plans to develop by 2034) jumped 12% in three months, from 25.2 GW to 28.3 GW.
The oversight provisions address inconsistencies in how utilities forecast demand. An October memo from State Sen. Gene Yaw (R-23) and Nick Miller (D-4) said, "The process by which utilities and load-serving entities submit information to PJM is opaque, and policymakers, regulators, and stakeholders lack confidence in the data’s reliability.”
Shapiro backed the transparency measures after threatening in September 2025 to withdraw Pennsylvania from PJM's markets unless the state received greater governance authority. The reporting framework will allow regulators to track how rapidly data centers consume electricity and water as AI infrastructure demand accelerates across the region.
California teachers pension invests $2 billion in clean energy infrastructure
What’s the story?
The California State Teachers' Retirement System (CalSTRS) announced on July 15 that it will commit up to $2 billion in sustainable infrastructure investments through a strategic partnership with global investment manager Nuveen. CalSTRS will serve as an anchor investor for Nuveen's Energy & Power Infrastructure Credit Fund II (EPIC II).
The fund invests in renewable power, energy storage, industrial decarbonization, energy efficiency, and circular economy investments. The investment will also support onshoring of infrastructure supply chains, domestic manufacturing, and buildout of AI and digital economy infrastructure.
Don Dimitrievich, Global Head of Nuveen Energy Infrastructure Credit, said, "The rapid expansion of artificial intelligence, the onshoring of manufacturing and industrial supply chains, and the broad electrification of the economy are collectively creating a generational need for new infrastructure investment. We believe private credit is uniquely positioned to play a leading role in financing that buildout while also achieving positive sustainable outcomes."
Why does it matter?
CalSTRS serves more than one million California public school educators and beneficiaries. The fund currently manages more than $415 billion in assets.
Nick Abel, Investment Director at CalSTRS, said, "We believe sustainable infrastructure credit requires specialists' expertise to originate, underwrite and structure bespoke capital solutions. Sustainable infrastructure credit also represents an important allocation for CalSTRS as we seek to generate strong risk-adjusted returns and contribute to a cleaner, more resilient, and affordable clean-energy economy."
The National Public Pension Funds Association has flagged concerns about pension funds' increasing allocations to private credit — debt financing from non-bank lenders — citing risks around valuation transparency and liquidity. CalSTRS' $2 billion commitment to Nuveen's infrastructure fund represents the type of private credit allocation that has drawn scrutiny from public pension governance experts.
ESG legislation update
No states took action on ESG-related bills since July 7, 2026. Click here to see the ESG legislation tracker.
Around the world
EU eases carbon pricing requirements to aid heavy industry.
What’s the story?
The European Commission released its review of the Emissions Trading System (ETS) on July 19, proposing changes to the European Union's (EU) carbon pricing mechanisms. The Commission proposed slowing the pace of annual emission reductions from 4.3% (current) and 4.4% (planned for 2028-2030) to 3.7% annually from 2031 to 2035 and 1.7% from 2036 onward. The proposal would extend the issuance of emissions allowances into the 2040s and slow the phase-out of free allocations for sectors covered by the Carbon Border Adjustment Mechanism until 2038.
To address pressure from Italy, Poland, and the Czech Republic over carbon compliance costs, the commission proposed allowing companies in the hardest-to-decarbonize sectors to purchase additional allowances. The proposal would also integrate 250 million tons of high-quality domestic carbon removals into the ETS, creating additional allowances for sectors like steel and cement that are difficult to decarbonize.
Wopke Hoekstra, Commissioner for Climate, Net Zero and Clean Growth, said that "The EU ETS has proven that carbon pricing works. It has cut emissions, strengthened Europe’s energy security and mobilised investment across our economy. Today’s proposal on the ETS review brings together three key goals: climate action, competitiveness, and independence. It advances climate action, by also transforming the ETS into a genuine engine for innovation and investment."
Why does it matter?
More free permits reduce compliance costs for manufacturers but weaken the financial incentive to cut emissions. The expansion signals that the EU is prioritizing industrial competitiveness over aggressive carbon reductions at a time when geopolitical tensions, including the Russia-Ukraine war and war involving Iran, have driven energy prices higher.
The Commission proposed requiring member states to spend 50% of ETS revenues on industrial decarbonization and establish an Industrial Decarbonisation Bank with up to €100 ($114) billion available for clean technology investments. The slowed emission reductions and extended allowances reflect tension between maintaining manufacturing capacity and meeting climate targets.