Florida joins a long list of Republican-leaning US states in banning or legislating against Environmental, Social and Governance (ESG) policies as part of the states’ $186BN pension plan.
According to a new resolution passed by the administration of Governor DeSantis, Fund Managers working for Florida’s $228BN pension funds will no longer be able to incorporate ESG considerations in the investment process.
It states that investment decisions must be based on ‘pecuniary factors’ or those expected to have a material impact on investment risk and return, specifying that these factors must not include the “furtherance of social, political or ideological interests.”
While the Department for Labor emphasised that the resolution was created in a bid to ensure that plan fiduciaries focus on financial objectives and not sacrifice performance, many investors are fighting back and claiming that it can instead hurt investors and expose them to unnecessary risk.
Bryan McGannon, director of policy and programs at US SIF which supports sustainable investment businesses went as far as saying: “DeSantis’s decision is clearly tied to politics because it’s certainly not in the best interest of pension fund beneficiaries.”
The move forms part of an anti-ESG push by politicians in several Republican-led states which includes Texas and its recent release of a list of fund managers including Blackrock, Credit Suisse and UBS who have been called for potential divestment due to their strong ESG credentials and support for net zero investing.
The Republican state governor of Texas, Greg Abbott, commenced the move in June 2021 when he passed an ‘anti-ESG bill’ prohibiting state financial institutions; including its six pension funds, from contracting with or investing in businesses that divest from coal, oil or natural gas companies.
Lawmakers within Indiana, Ohio and West Virginia introduced similar bills in 2022 to shield ‘Big Oil’ from ‘boycott’ measures by institutional investors while in Arizona, Republican Senate nominee Blake Masters has characterised ESG scores as an existential threat to America.
Governor DeSantis has been particularly vocal in his anti-ESG stance in a recent string of social media posts where he describes ESG as an “an attempt to impose through the economy, an ideological agenda that could not win at the ballot box.” He went on to say that the resolution passed will direct Florida’s Fund Managers to make sound investments on returns and not woke ideology.
He finished by stating that “ESG is dead on arrival in Florida.”
But which is a bigger threat to America and its Family Office investors, ESG or its anti-ESG stance?