The list of people and organizations that have spoken out against North Carolina's HB2 law, often known as the state's "bathroom bill" for its policy that dictates which restroom transgender people should use in government buildings and public schools, just keeps growing: The CEOs of more than 200 corporations. The NCAA and the NBAMusicians who have condemned the law or cancelled shows over it, including Jimmy Buffett, Bruce Springsteen and Ringo Starr.

Now investors are adding their names to the list of those taking aim at House Bill 2. In a letter to be released Monday, 53 investors ranging from those managing public pension funds to asset managers to foundations, representing $2.1 trillion in total assets under management, said they want the controversial law overturned. Among others, the letter was signed by Morgan Stanley Investment Management, John Hancock, RBC Wealth Management, Trillium Asset Management and the New York City Comptroller's office, which oversees municipal employees' pension funds.

"We stand together against North Carolina House Bill 2 (HB2)," the investors wrote in the letter. "Not only does this bill invalidate the human rights of individuals across the state, but it also has troubling financial implications for the investment climate in North Carolina." HB2 also prevents municipalities from passing anti-discrimination protections that go beyond state law.

Unlike businesses such as PayPal or Deutsche Bank, which have abandoned plans to invest in the state over the law, or organizations like the NBA, which said it will move the 2017 All-Star Game from Charlotte, the letter does not include any direct threat to pull business from the state. Rather, the signed investors argue the law hurts their portfolio companies.

Citing challenges the bill has already created or could introduce for companies doing business in North Carolina, the letter says it puts federal and private funding at risk, could add to the cost of capital if the state's credit rating were to be downgraded, and could prevent the companies it invests in from hiring the most talented employees.

"As long-term investors in North Carolina, we seek a predictable, stable business climate where our portfolio companies can thrive," it states. "HB2 is undermining that basic condition for sound investment."

The letter was seen as an unconventional approach to activism by a coalition of shareholders. Institutional investors often make their views known about federal legislation or regulatory changes. And they often take on social issues such as diversity or environmental issues via investor proposals aimed at individual companies, pushing them to take action by forcing a shareholder vote. But, said Amy Borrus, deputy director at the Council of Institutional Investors, "it's unusual to see a group of shareholders rallying on an issue at the state level." 

Both Trillium and the New York City Comptroller's office have filed shareholder proposals at individual companies on the issue of diversity, pushing them to put more women on their board or disclose more about their workplace diversity statistics. As research shows a link between greater diversity and bottom line results, investors have become increasingly interested in the makeup of companies' management teams, boards of directors and broader workforces.

In the announcement, New York City Comptroller Scott M. Stringer said it did not want to "sit idly by as HB2 undermines fundamental human rights at our expense," adding that "for the last 25 years, New York City’s pension funds have pushed more than 100 companies to enact non-discrimination policies that protect LGBTQ individuals and ensure they attract, retain, and promote the best and the brightest."

The HB2 letter from the investors also reflects how widespread the opposition has become to the North Carolina law. More than 200 major corporations have signed a letter from the advocacy groups Human Rights Campaign and Equality NC opposing the law, and 68 signed an amicus brief in support of the Department of Justice’s effort to challenge the law. Morgan Stanley, John Hancock and RBC signed the legal brief as well.

Equality NC executive director and Democratic state representative Chris Sgro said in an interview that the investors' letter is "an additional voice in the existing chorus," he said. "In terms of the economic impact on the state, all of the things we’ve already been talking about will be amplified by this kind of statement." 

[NBA will move 2017 All-Star Game from Charlotte over HB2 law]

That additional voice is exactly what Jonas Kron, director of shareholder advocacy at Trillium Asset Management, which helped organize the statement and was one of the socially responsible investment management firms to sign it, hopes it will achieve. "As investors, we look for those factors that are going to help companies outperform," he said in an interview. "Those companies that are doing business in North Carolina are operating under a cloud of discrimination." 

He said the move to speak out on one state's policy reflects a growing trend from investors. "Traditionally what we do is engage at the company level," Kron said. "But investors are starting to pay more attention and get more vocal about public policy at the federal level and increasingly at the state level."

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