By Isla Binnie and Ross Kerber
(Reuters) – Florida Gov. Ron DeSantis signed a bill on Tuesday banning state officials from Invest public money to promote environmental, social and governance goals and ban ESG bond sales.
The bill is one of the most far-reaching efforts by Republicans in the United States against sustainable investing efforts and is a clear political message from would-be presidential candidate DeSantis.
Republicans, including some from energy-producing states, say many executives and investors have lost focus on returns as they increasingly consider issues such as climate change and workforce diversity .
“We want them to serve as trustees. We don’t want them to be on these ideological joy rides,” DeSantis said before signing the bill at a webcast event.
Analysts say the legislation goes a step further than other states’ anti-ESG bills, although business groups worry that the efforts pose financial risks. Analysts say Florida’s law now raises some questions about how it works in practice.
For example, fund managers who work for institutions such as the state’s large pension funds are required to include disclaimers in certain communications with portfolio companies that make it clear that they do not reflect the views of Floridians.
Fund managers who did not include adequate disclaimers could face regulatory action, said Joshua Lichtenstein of law firm Ropes & Gray. But, he added, “it’s weird to say you’re only speaking on behalf of some of your clients.”
The law also prohibits the sale of ESG bonds, a popular form of funding for renewable energy. Ways for energy projects or lower debt costs for borrowers if borrowers meet gender diversity or greenhouse gas emissions targets.
Substantial ESG mandated capital. Another issue is how officials interpret the terms, said Thomas Torgerson, co-head of global sovereign ratings at DBRS Morningstar, which rates debt.
“If we as a rating agency are unable to assess the environmental, social or governance risks that give us problems. There are highly relevant climate and weather risks, especially in states like Florida, and will be reflected in our credit risk assessment,” Torgerson said.