Major investors representing more than $2.1 trillion in assets gathered in downtown Raleigh Monday to deliver a message to Gov. Pat McCrory and the North Carolina General Assembly. Fully repeal HB2, they said, before the damage to the North Carolina economy becomes irreversible.
“Obviously there has been overwhelmingly negative reaction to HB2,” said Matthew Patsky, CEO of Trillium Asset Management. “While the U.S. economy continues to grow, quite frankly North Carolina appears to be headed for what I would call a state government inflicted recession.”
Patsky said that’s because the controversy over N.C. House Bill 2, which prohibits anti-discrimination protections for lesbian, bisexual and transgender people, has reached a fever pitch and is impacting how investors view the state and the businesses that call the Tar Heel state home.
With offices in Boston, San Francisco, Portland, Oregon and Durham, Trillium is in a position to see how the national and international investment community is responding to HB2. “I have clients asking for North Carolina free portfolios,” Patsky said. “Including divestment from North Carolina municipal bonds. Moody’s and the S&P have already warned of the potential risk to the state’s bond rating.”
In the six months since McCrory signed HB2 into law, North Carolina has seen a series of blows to its reputation – boycotts from major touring entertainment acts, major companies like PayPal canceling planned expansions in the state and most recently the loss of NCAA and ACC championship games.
While the various cancelled events have cost the state more than a $500 million and led even Republicans who voted for the law to call for its repeal, many have argued that as a percentage of the state’s total revenues the losses have been small.
But Patsky and the other investors at Monday’s press conference said event cancellations and lost sporting events are a small part of the economic damage. The investment North Carolina is now missing without any dramatic press releases or cancellation announcements could deal a serious blow to the state economy and reputation far into the future.
“This fallout is real and it’s had a devastating effect on our reputation,” said Bonny Moellenbrock, director of Investors’ Circle, which is headquartered in Durham.
Moellenbrock was one of a number of representatives from various other investment concerns at Monday’s meeting, held in a board room at downtown’s HQ Raleigh. They were united in their assessment of HB2’s impact and the necessity of its full repeal.
Moellenbrock said she’s been in North Carolina for 30 years and has always enjoyed being an ambassador for the state in the investment community. But in the wake of HB2, she said, she finds herself having to defend the state to investors repelled by the law.
Successful states need to attract talent and capital to thrive, Moellenbrock said.
“HB2 is a terrible threat to North Carolina’s ability to attract both,” she said.
Todd Sears, founder of Out Leadership, was also on hand Monday.
A wealth of research shows businesses that value and offer protections for LGBT employees consistently outperform those that do not, Sears said – and they also outperform the market. That’s why Fortune 500 Companies overwhelmingly offer such protections and are wary of laws like HB2, which he said is “not only wrong, but has been carried out in a very mean spirited way.”
It’s bad enough that the law requires transgender people to use restrooms in schools and other public buildings according to the sex they were assigned at birth rather than the gender with which they identify, Sears said. But the public campaign to support the law has centered on fictional “men in dresses” narratives that prey on fears of women and young girls being molested in bathrooms.
There is no evidence that transgender people have engaged in that sort of behavior when they’re allowed to choose the restrooms appropriate for them, Sears said, and to make that the focus of the debate harms LGBT people and endangers North Carolina’s reputation as an inclusive investment environment. Working with investors in London and Hong Kong, Sears said, he’s seen the opinion of North Carolina that sort of stance has engendered in the international business community.
“It’s something global investors are talking about,” Sears said. “North Carolina is being likened to places like Singapore, where it is illegal to be gay.”
In recent weeks a push to repeal HB2 failed when McCrory and conservative leaders of the General Assembly insisted that the Charlotte City Council would first need to rescind the LGBT protections it passed in a local ordinance that prompted HB2’s passage.
Joshua Humphreys, president of the Croatan Institute, said the failure to achieve repeal came down to politics.
“This group does not care about politics,” Humphreys said, referring to the more than 60 investor groups who signed on to the call for repeal Monday.
However it is accomplished, Humphreys said, serious investors simply want the law – and the controversy and instability it has generated – to disappear completely.
“Quite simply, HB2 is bad for business,” Humphreys said.