By Mark S. Nelson, J.D.
Florida Governor Ron DeSantis (R) announced that he is working with that state’s Senate and House leaders to enact legislation that he says would protect Floridians from the “elite-driven phenomenon” of ESG or environmental, social, and governance investing. A key feature of the forthcoming legislation will be to codify measures Florida has already taken to decouple its state finances from firms that engage in ESG investing.
In addition to codifying existing Florida policies, DeSantis said the proposed legislation would: (1) limit how banks can treat Floridians seeking to do business with them; (2) limit the institutions at which the state of Florida can deposit funds regarding state investments, procurement and contracting, and the issuance of state bonds; and (3) bar the use of social credit scores.
With respect to state investments, the proposed legislation would require “fund managers [to] only consider financial factors that maximize the highest rate of return.” This provision would stand in contrast to the federal Department of Labor’s latest fiduciary rulemaking, which allows fund managers to consider ESG factors in making investment decisions. Previously, The Trump Administration’s DOL had issued a rule that required fund managers to consider only pecuniary factors in making such decisions.
Florida’s Speaker of the House Paul Renner (R-Dist. 19, Flagler/St. Johns) said the anti-ESG bill will be sponsored by Florida House member Bob Rommel (R-Dist. 81, Collier). Rommel later tweeted: “Thank you @GovRonDeSantis for fighting for Floridians, it my privilege and honor to stand with you and @Paul_Renner.”
Florida’s Senate President, Kathleen Passidomo (R-Collier/Hendry/Lee), asked a press conference rhetorically if anyone ever votes for what stocks funds invest in. She suggested despite investors’ reliance on funds, funds care more about ideology than returns. She also suggested that listeners read and vote their proxies.
Passidomo’s remarks would echo those of DeSantis. “By applying arbitrary ESG financial metrics that serve no one except the companies that created them, elites are circumventing the ballot box to implement a radical ideological agenda,” said DeSantis. “Through this legislation, we will protect the investments of Floridians and the ability of Floridians to participate in the economy.”
The text of the proposed legislation was not yet available. A number of states have recently pursued a variety of anti-ESG strategies that range from attorneys’ general opinions to regulatory actions, to legislation but often on single or more narrow topics. The latest Florida proposal, if enacted, would appear to be one of the broadest attempts by a state to legislatively curb ESG investing. DeSantis said he expects that other states may follow Florida.