TAMPA, Fla. (WFLA) — Building on steps taken last year, Florida Gov. Ron DeSantis and the State Board of Administration, or SBA, approved guidelines that would bar state-run fund managers from considering “woke environmental, social, or governance,” or ESG issues when making decisions about investments.
The Florida SBA dictates how the state’s hundreds of billions in retirement assets and other funds are managed and invested. The SBA is governed by a three-person board of trustees: DeSantis, Chief Financial Officer Jimmy Patronis and Attorney General Ashley Moody.
During the upcoming legislative session, DeSantis said he will propose a bill that will lay out requirements for how fund managers should make investment decisions to ensure ESG policies are not considered.
Environmental, social, and corporate governance (ESG) has been embraced by top corporations in recent years. It refers to a set of standards used by investors to screen companies for risk, seeing how they handle issues like climate change, office relationships, and shareholder rights.
In July 2022, the SBA issued new guidelines for state investments, pushing back on what they called a “threat” to the “vitality of the American economy and Americans’ economic freedom.” The officials argued ESG policies unfairly target certain businesses and individuals with a “woke ideological agenda.”
In August, the SBA announced that ESG considerations would be removed from all state pension investments, saying Florida would no longer “‘sacrifice investment return or take on additional investment risk to promote any non-pecuniary factors’ when making investments or proxy votes.”
In December, Patronis announced a $2 billion divestment from BlackRock after CEO Larry Fink said in an open letter that he was committed to his company’s ESG policies.
It’s worth noting that most companies that manage Florida’s investment portfolios have similar policy directives, according to both reporting by Pensions & Investments and Bloomberg, which was independently verified by WFLA.com. The list below was provided by the Office of the Florida CFO.
| Long Duration | Intermediate Duration |
|---|---|
| Galliard | Galliard |
| Fidelity | IR+M |
| Sterling Capital | MetWest |
| All Spring (Wells) | Sterling Capital |
| BlackRock (No Longer a manager as of December 2022) | |
| Manulife | |
| Amundi | |
| Goldman Sachs | |
| PGIM | |
| Western Asset | |
| Nuveen | |
| Insight Investment |
Shortly after Patronis made the BlackRock divestment announcement, he sent a letter to the SBA’s Chief Investment Officer detailing the reasons for the decision.
“The nation is headed into challenging economic times, and we need asset managers that are focused on the bottom line. Major banks are predicting a recession for the coming year, and I need partners within the financial services industry who will generate returns so we can keep funding schools, hospitals and roads should times get tough,” Patronis wrote in the letter.
He also said that BlackRock’s policies had led to losses in managed assets.
“In the context of Florida’s Treasury, BlackRock’s performance was not especially good and there are plenty of other asset managers in this space,” the letter continued. “In the last year, BlackRock underperformed relative to their benchmark in seven out of the twelve months; in 1 and 3 year Net returns, BlackRock ranked 9th out of 12 fund managers; and in 1 and 3 year Risk Adjusted returns, BlackRock ranked 7th out of 12 fund managers.”
A spokesperson for Patronis said BlackRock’s ESG initiatives weren’t the only reason for its divestment. There were performance issues as well, they said.
Patronis said in his letter that he thought Fink’s statements meant BlackRock’s leadership was not “laser-focused” on investment returns. He called Fink’s letter a “manifesto” and said his “social agenda” had “draw[n] some fire.”
Patronis promised that the state would take action in an interview with Bloomberg in December, saying lawmakers had indicated they were “going to propose sweeping ESG policy legislation.”
Now, that indication has born fruit with the SBA making their anti-ESG efforts a priority for March’s legislative session in Tallahassee.
“As a fiduciary of the State of Florida, I and my fellow trustees have an obligation to make responsible investment decisions on behalf of the beneficiaries we represent — not cater to woke corporate executives trying to force political ideology,” Moody said.
DeSantis echoed a similar sentiment, saying: “Corporations across America continue to inject an ideological agenda through our economy rather than through the ballot box. Today’s actions reinforce that ESG considerations will not be tolerated here in Florida, and I look forward to extending these protections during this legislative session.”
The proposed legislation would “rein in the use of discriminatory ESG practices” in the financial sector by:
- Prohibiting big banks, credit card companies, and money transmitters from discriminating against consumers for their religious, political, or social beliefs.
- Barring financial institutions from considering so called “ESG Credit Scores” in banking and lending practices to prevent Floridians from obtaining financial services like loans, lines of credit, and bank accounts.
- Permanently prohibiting State Board of Administration (SBA) fund managers from considering ESG factors when investing the state’s money.
- Requiring SBA fund managers to only consider maximizing the return on investment on behalf of Florida’s retirees.
Since there’s a Republican super-majority in both chambers of the legislature, the codification of those policies is likely to pass on pure partisan lines.
