Anti-ESG bill headed to DeSantis’s desk

by | Apr 20, 2023

  • The Florida Senate has approved a bill that would prevent investment managers from consideration of ideological factors in investment decisions. 
  • The bill also prohibits financial institutions from applying a “social credit score” and denying services based on political opinions or speech, and it expands on a directive issued last year by DeSantis to prioritize the highest returns without considering environmental, social or governance (ESG) standards.
  • Critics claim that the bill could cost the state money and hinder investment decision-making and point to other states that have dropped or rewritten similar proposals due to projected losses in their pension systems.
  • Supporters say the bill’s critics are wrong because it doesn’t actually ban investment in ESG-related funds, rather, it merely prohibits ESG considerations as a factor in investment decisions. 
  • The bill now heads to Governor Ron DeSantis’s desk for signature.

TALLAHASSEE — The Florida Senate on Wednesday gave final approval to a bill that would prohibit investment strategies that Gov. Ron DeSantis has deemed “woke,” sending the issue to his desk.

The Republican-controlled Senate voted 28-12 along party lines to prohibit consideration of “environmental, social and governance” standards in investing government money. The bill (HB 3), a priority of House Speaker Paul Renner, R-Palm Coast, passed the House last month.

The bill also would prohibit financial institutions from engaging in any “unsafe and unsound practice” or applying a “social credit score” when offering services. They wouldn’t be able to deny or cancel services to people based on political opinions, affiliation or speech.

The measure would expand on a directive issued last year by DeSantis and state Cabinet members requiring investment decisions in the Florida Retirement System Defined Benefit Plan to prioritize the highest returns without consideration of the standards known as “ESG.”

Republicans across the country have criticized ESG as an “agenda-driven” effort against investments in fossil fuels, arms manufacturers and prisons.

Senate bill sponsor Erin Grall, R-Vero Beach, said the measure would require fund managers to “maximize financial returns.”

During questioning Tuesday, Grall said the bill would require state- and local-government investment decisions to be based “solely on pecuniary factors.” She called ESG “vague in how it’s applied” and said investment practices shouldn’t “sacrifice returns on investment for the subjective priorities and political agendas of large corporations, institutional investors and money managers.”

“Our decisions should be agnostic of the politics, social (and) ideological, and we should be making the best decisions based on the return for Floridians,” Grall added.

The bill wouldn’t stop fund managers from investing in companies that use such standards. But the fund managers wouldn’t be able to base investment decisions on issues such as climate change and social diversity.

Critics contend the proposal would cost the state money and hinder investment decision-making.

Kansas lawmakers this year dropped a tougher version of anti-ESG rules after the head of the state pension system warned the changes could result in $3.6 billion in losses over 10 years. Indiana lawmakers also rewrote ESG directives after an initial proposal was projected to cost the pension system $6.7 billion over the next decade.

Legislative analysis of the Florida proposal didn’t include a projection of economic impacts.

Sen. Tina Polsky, D-Boca Raton, said studies have shown the change could cost the state $97 million to $300 million in additional interest charges on municipal bonds.

Sen. Lori Berman, D-Boca Raton, questioned why the state would want to cut itself off from companies like BlackRock, which she said has made “tremendous returns” through investments using ESG standards.

In December, state Chief Financial Officer Jimmy Patronis announced that Florida would pull $2 billion from BlackRock, the largest asset-management firm in the world, because of ESG practices.

Sen. Jason Pizzo, D-Hollywood, called the proposal “incredibly laughable,” saying he knows people the bill targets.

“If they pulled out while we’re trying to be punitive to them … we would be in a really bad financial condition,” Pizzo said.

“Remember, the people that we’re trying to attack are not in the business of losing money and giving it away,” Pizzo added.

When the legislation was rolled out in February, DeSantis’ office called the proposals a way to “protect Floridians from the woke environmental, social, and corporate governance movement that continues to proliferate throughout the financial sector.”


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