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Florida Bars ESG Investment, Takes Back Proxy Voting

In a press release last month, Florida Gov. Ron DeSantis claimed credit for eliminating environmental, social, and governance considerations from the state’s pension and investment funds. DeSantis is one of three Trustees of Florida’s State Board of Administration that passed a resolution directing the state’s fund managers not to consider ESG issues when making investment decisions.

In his announcement, DeSantis said:

“Corporate power has increasingly been utilized 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. … [T]he tax dollars and proxy votes of the people of Florida will no longer be commandeered by Wall Street financial firms and used to implement policies through the board room that Floridians reject at the ballot box. We are reasserting the authority of republican governance over corporate dominance and we are prioritizing the financial security of the people of Florida over whimsical notions of a utopian tomorrow.”

Florida’s new resolution also “reclaims” the state board’s proxy voting authority “from large financial firms such as Blackrock, State Street, and Vanguard” by providing guidance to board employees who will now be responsible for proxy voting and investment decisions. That guidance will “ensure” that the decisions will reflect voters’ values “as expressed through the democratic process rather than blindly in lockstep with the ESG mania taking hold of Wall Street and Washington,” the statement added.

Recently, Texas Comptroller Glenn Hegar proclaimed that BlackRock and nine European financial giants violate a Texas law passed last year prohibiting the state’s pension funds from doing business with firms that “boycott” the fossil fuel industry. Hegar also released a list of 348 mutual funds that the state’s funds will be required to divest.

In his announcement of the ban, Hegar said, “The environmental, social and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy.”

BlackRock disagreed with Hegar:

“This is not a fact-based judgment. BlackRock does not boycott fossil fuels — investing over $100 billion in Texas energy companies on behalf of our clients proves that. … Elected and appointed public officials have a duty to act in the best interests of the people they serve. Politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees, is not consistent with that duty. Texans deserve access to the full range of asset managers, and investment opportunities, that can help them meet their retirement goals. We are proud to play our part.”

Corporate governance think-tank The Corporate Citizenship Project applauded the moves from Florida and Texas

Not everyone agrees that ESG investing is as bad as DeSantis and Hegar make it out to be. In June of last year, the state of Maine enacted a law requiring the state pension fund to divest stocks in fossil fuel companies by January 1, 2026. Some 200 publicly traded oil, natural gas, and coal companies could be affected by the divestment. About 7.6% of Maine’s retirement system Fund of $17.6 billion is invested in fossil fuel companies.

Will proposed rules from regulators at the state and federal levels make matters better or worse? The European Union’s European Securities and Markets Authority and the United Kingdom’s Financial Conduct Authority are looking into how they might establish requirements for ESG marketing and investing that will aid in achieving the real goal: net-zero carbon emissions by 2050. Lack of transparency into how ESG is defined by asset management firms gives opponents like DeSantis free rein to trample on net zero emissions as nothing more than “whimsical notions of a utopian tomorrow.”