Florida government bans ESG from state pension funds

Florida Governor Ron DeSantis, along with administrators of the State of Florida Board of Directors (SBA), on Tuesday passed a resolution ordering fund managers to disregard environmental, social and governance factors. when making investments for state pension funds.

Managers of public funds must now base their allocation decisions “only on pecuniary factors” and “cannot sacrifice investment return or take on additional investment risk to promote non-pecuniary factors”, including interest social, political or ideological, indicates the resolution. .

The Florida SBA oversees about $250 billion in total assets and manages funds for the Florida Retirement System Pension Plan — which comprises about 80% of that total assets, according to Bloomberg — and about 30 other funds.

In a press release, DeSantis (pictured) said that “with the resolution we passed today, the taxpayers’ money and the proxy votes of the people of Florida will no longer be commandeered by the financial companies of Wall Street and used to implement policies through the boardroom that Floridians reject at the polls. We reassert the authority of Republican governance over corporate dominance and prioritize the financial security of the people of Florida over fanciful notions of a utopian future.

The resolution directs the SBA to conduct a “comprehensive review” and prepare a report by December 2023 that analyzes the voting practices of the Florida Retirement System’s defined benefit pension plan. This report will include a “review of decision-making in voting decisions and adherence to the Fund’s fiduciary standards,” the resolution says.

However, exactly how the rule will be enforced inside funds — for example, whether managers will be forced to divest positions the SBA deems non-compliant — is unclear.

In addition to today’s resolution, DeSantis last month proposed a bill for the 2023 legislative session that would amend Florida’s Deceptive and Unfair Trade Practices Act to prohibit large banks, credit card companies and money issuers not to invest in certain public companies based on their ESG ratings. .

Republican lawmakers across the United States have worked to stifle institutional ESG investing in red states. Earlier this year, Texas politicians created a blacklist of mutual funds, ETFs, SMAs and fund managers who boycott fossil fuels in an effort to remove them from state pension plans. West Virginia Treasurer Riley Moore also created a blacklist of companies that had boycotted fossil fuels, barring those companies from being eligible for state banking contracts. Lawmakers in Oklahoma and Indiana introduced similar legislation.

Interestingly, the statement from DeSantis’ office announcing today’s resolution isn’t just aimed at ESG — the governor is also mobilizing against diversity, inclusion, and equity considerations in investing. Manager research teams at major banks and wealth management firms have become increasingly committed to including diversity, equity and inclusion issues in their fund selection due diligence processes.

“Corporate power has increasingly been used to impose an ideological agenda on the American people through the perversion of financial investment priorities under the euphemistic banners of environmental, social and corporate governance and diversity, inclusion and equity,” DeSantis said.