New Senate President Kathleen Passidomo is on board with Gov. Ron DeSantis and other leading Republicans’ plan to isolate Florida’s investments from social considerations, and she expects legislation to come next year.
State leadership is unified in its opposition to “woke” investment practices called environmental, social and corporate governance standards, more commonly known as ESG. In Florida, the opposition is an effort so far driven by DeSantis and Chief Financial Officer Jimmy Patronis, with support from House Speaker Paul Renner.
With Passidomo’s blessing and a GOP supermajority in both the House and Senate, lawmakers are all but certain to pass an ESG bill next year.
“We should not be investing our state dollars based upon social things,” Passidomo told reporters Thursday.
Florida’s latest action on ESG came earlier this month when Patronis, a statewide-elected Republican, announced the state would pull $2 billion in investments from BlackRock, which has emerged as the archetypal ESG investor. By the start of 2023, Patronis expects the state Treasury to fully separate itself and the state’s Treasury Investment Pool from BlackRock.
Lawmakers were in Tallahassee this week for a Special Session primarily dedicated to property insurance. However, committee meetings will resume in January ahead of the 2023 Regular Session, and ESG could be on the docket.
“I want to hear what my colleagues have to say,” Passidomo said, noting there will be future discussions. “We have some members that are very interested in the issue, and I am supporting their taking on these issues and coming back with ideas, so we’ll stay tuned.”
In recent years, conservatives have increasingly targeted stakeholder capitalism, which promotes the idea that corporations serve the public at large, not just shareholders. In particular, ESG and BlackRock have become rallying cries in the national culture war against “wokeness.”
North Dakota was the first state to enact an anti-ESG legislation in 2021, and Texas followed shortly after with boycott bills and this year “banned” BlackRock and other companies. In August, the Florida Cabinet approved rules preventing the State Board of Administration from basing pension plan investment decisions on more than just economic factors.
BlackRock managed $1.43 billion of Florida’s Long Duration Portfolio, which manages investments such as corporate obligations, asset-backed securities and municipal bonds. BlackRock also exclusively managed the Treasury’s $600 million Short Term Investment Fund (STIF), which uses excess cash to boost Florida’s investments.
Patronis says he opposes the state having ties to ESG on the basis that it introduces investment factors beyond making money for shareholders. If government is trying to generate revenue, such as for state pensions, Patronis continues, government’s purpose should be to get the best returns it possibly can.
Patronis has also likened BlackRock’s practices to “social-engineering projects.”
In 2020, BlackRock CEO Larry Fink announced plans in 2020 to move toward environmentally sustainable investments after the investment giant received criticisms for its resources in fossil fuels.
Passidomo disputed the premise that BlackRock is moving toward ESG because of market influences.
“If they are truly in the business to make money, then that’s what they should be doing, not adding a layer of, well, we’re going to look at the social issues, whether they’re politically correct or not,” the Senate President said. “That flies in the face — that’s a layer making money.”
Passidomo’s position puts her squarely in line with Renner, her House counterpart.
Renner was an early critic of ESG and joined DeSantis this summer when the Governor declared his intent to crack down on the practice. He reiterated his commitment against “ESG’s political dogma” during his speech after being sworn in as House Speaker last month.
Passidomo told reporters she had a meeting with a company that provides services to Florida’s prisons. The company relayed that a large U.S. bank closed the company’s accounts because of their involvement in immigration policy.
“If the bank had said, ‘Hey, you use child labor,’ well, of course you would not want to loan money or hold accounts for a company that does that,” Passidomo said. “But if it’s some social issue, that makes no sense. And if I were a shareholder of that bank, I’d be upset too because you don’t loan money to a company that’s paying it back.”