Gov. DeSantis signs law aimed at blocking ‘ESG’ standards in government investments

ESG describes investment philosophy based on ‘environmental, social and governance’ standards

JACKSONVILLE, Fla. – Gov. Ron DeSantis signed a law Tuesday that’s designed to eliminate the consideration of environmental, social and governance (ESG) standards from government investment strategies, procurements, bond issuances and use of banks, according to News 6 partner WJXT-TV.

“ESG” describes an investment philosophy that takes into account whether companies act responsibly with regard to the environment, human rights, equality and other factors.

DeSantis, who signed the bill at a news conference at the JaxPort Cruise Terminal in Jacksonville, spoke about his decision behind a podium with a sign that read “Government of Laws: Not Woke Politics.”

He called the idea of ESG a conduit for oppressive policies and has called for the government to restrict investors from using those criteria.

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The bill was a priority of House Speaker Paul Renner, R-Palm Coast, who joined DeSantis at the news conference, along with state CFO Jimmy Patronis.

Among other things, the law expands a directive issued by DeSantis and members of the state Cabinet last year that required investment decisions in the Florida Retirement System Defined Benefit Plan to prioritize the highest returns without consideration of the standards known as “ESG.”

DeSantis brought up that Patronis had the state pull $2 billion from BlackRock, the largest asset-management firm in the world, due to ESG practices.

“We want them to act as fiduciaries,” DeSantis said. “We do not want them engaged on these ideological joyrides, which are not good for the people of the state of Florida.”

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.

Republicans across the country have criticized ESG. Senate bill sponsor Erin Grall, R-Vero Beach called ESG standards “vague” and said they can be very “agenda driven.”

“(It’s) not necessarily affecting the ratings as much as it may in the future. But when your three major credit-rating agencies are considering ESG policies, I would say that it is considerably widespread,” Grall said.

DeSantis said Tuesday that the bill is a counter to the idea of a “social” credit score that ranks your creditworthiness based on whether you’re aligning with a certain ideological agenda or not.

“That is not something we should want to see in the United States of America,” DeSantis said. “They do it in China. They do it in other places, but that’s not something that’s appropriate here.”

The law DeSantis signed does the following:

  • Codifies actions taken by the State Board of Administration at DeSantis’ direction to ensure that all investment decisions must be driven solely by pecuniary factors and may not sacrifice investment returns to promote factors like ESG and extending these requirements to all state and local funds
  • Prohibits the use of ESG factors by state and local governments when issuing bonds, including a contract prohibition on rating agencies whose ESG ratings negatively impact the issuer’s bond ratings
  • Prohibits all state and local entities from considering or giving preference to ESG as part of the procurement and contracting process
  • Prohibits banks that engage in corporate activism from holding public deposits as a Qualified Public Depository (QPD)
  • Prohibits financial institutions from discriminating against customers for their religious, political, or social beliefs — including their support for securing the border, owning a firearm, and increasing our energy independence
  • Prohibits the financial sector from considering so-called “Social Credit Scores” in banking and lending practices that aim to prevent Floridians from obtaining loans, lines of credit, and bank accounts
  • Directs the Attorney General, Chief Financial Officer, and Commissioner of Financial Regulation to enforce these provisions to the fullest extent of the law.

A news release from the governor’s office said the law serves as a blueprint for nearly 20 states that have joined an alliance “to push back against the proliferation of ESG through taking similar actions in their home states.”

Florida AFL-CIO lobbyist Rich Templin said the bill would hinder investment decision-making by prohibiting consideration of global changes.

“This is going to be a disaster,” Templin said. “We are now injecting an ideological political decision, as opposed to just what makes the most money. Right now, it’s just what makes the most money.”

News Service of Florida contributed to this report.

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About the Authors:

A Jacksonville native and proud University of North Florida alum, Francine Frazier has been with News4Jax since 2014 after spending nine years at The Florida Times-Union.