Democrats and Republicans each said the other party's position on ESG investing carries additional costs for states.

"This recent escalation of the Disney-DeSantis fight is unnerving, but it doesn't make that fight any more consequential for the municipal market," said Justin Marlowe of the University of Chicago.

The resignation comes after the bank was placed on the state treasurer's list of fossil fuel industry boycotters.

The placement of Wells Fargo, JP Morgan Chase, and Bank of America on the list makes them ineligible for state and local government contracts.

Despite legislation and political rhetoric, demand for environmental, social, and governance focused debt remains strong.

"When the rating agencies developed and rolled out their ESG scores, they said their ESG scores would not impact an issuer's credit rating. We are holding them to their word," said Ben Watkins, director of the state Division of Bond Finance.

In a supply-challenged market, foreign investors can play a role in buying taxable munis. 16Rock Asset Management's James Pruskowski discusses a 2023 reset in the muni market. Lynne Funk hosts (29 minutes)

"What are our options? You either pick these banks or you don't. If you don't, business shuts down. We stop building infrastructure," said state Treasurer John Schroder, the bond commission chair.

Gov. Laura Kelly allowed the bill's enactment without her signature, citing its "potential unforeseen consequences."

Proceeds will be used to refund some bonds that had been issued to finance or refinance eligible clean water and drinking water projects in the state.