Florida Governor Ron DeSantis signed a bill on Tuesday that bars state officials from investing public money to advance environmental, social and governance goals, as well as prohibiting the sale of government bonds linked to ESG goals.
The law is one of the most far-reaching efforts by US Republicans against sustainable investing efforts and sends a clear political message from DeSantis, a likely presidential candidate.
Republicans, including some in the oil and gas producing states, say many executives and investors have lost focus on profitability as they increasingly consider issues like climate change and workforce diversity.
“We don’t want them to get involved in these ideological merry-go-rounds,” DeSantis said shortly before signing the bill.
Analysts said the Florida legislation goes further than other state laws against ESG goals, even as business groups fear the efforts carry financial risks. The penalty now raises questions about how the rule will work in practice, analysts say.
For example, fund managers working for entities such as the state pension fund will need to include disclaimers in some communications with investment portfolio companies to clarify that they do not reflect the views of Florida residents.
Fund managers who fail to include such messages could face regulatory action, said Joshua Lichtenstein of law firm Ropes & Gray. But, he added, “it’s strange to say that you’re only speaking on behalf of some of your customers.”
The law also prohibits the sale of debt linked to ESG goals, a popular way to finance renewable energy projects or to reduce debt costs if gender diversity or greenhouse gas emissions targets are met.
Lawyers and credit analysts said the new law could deny municipalities access to large pools of capital. Another issue is how officials interpret the terms, said Thomas Torgerson, co-head of global sovereign ratings at DBRS Morningstar.
“If we, as a rating agency, are unable to assess environmental, social or governance risk, that creates a problem for us. There are climate risks that are very relevant, especially in a state like Florida, and they will be captured in our assessment of credit risk,” Torgerson said.
Source: Terra
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