Ban on socially, environmentally mindful investments advances in Senate

Florida moved a step closer to banning state and local governments from using environmental, social and governmental (ESG) considerations in making investment decisions.

A Senate panel approved a bill pushed by Gov. Ron DeSantis to require investment managers to consider only the risk and possible returns when investing. The bill (SB 302) would also ban investment managers from issuing ESG bonds or inking contracts with rating agencies that use ESG guidelines in issuing bond ratings.

Sen. Erin Grall, a Vero Beach Republican sponsoring the bill, said that while state and local pension funds might not be showing impacts of ESG-aligned investment decisions, the trend in financial institutions toward using ESG shouldn’t affect Florida’s policies.

“We are here before we have to see what that looks like, where our hands are tied as policymakers in order to keep our bond rating healthy and strong for the state of Florida,” Grall said. “This is something where we can get ahead of a problem and we can focus on the risk or return and what is best for the citizens of the state of Florida when it comes to how their funds are invested.”

The bill passed the Senate Fiscal Policy Committee on party lines, with Republicans in favor and Democrats opposed.

The bill also bans financial institutions from discriminating against consumers on the basis of religious or political beliefs or affiliations, or based on a “social credit score.”

Sen. Lori Berman, a Lantana Democrat, said the bill could restrict the investment options available to fund managers, even if ESG-conscious funds generated greater returns than those that didn’t include those considerations.

“It concerns me that we’re not focusing on how to get the best return,” Berman said. “Investing is a long-term goal, you’re not just investing for tomorrow. … If you don’t think we should be looking at these issues, look at Fort Lauderdale today. The flooding that is going on right now shows the dramatic economic impacts that climate change can have.”

DeSantis and the Cabinet have already moved on the push against ESG-aligned investments. DeSantis banned ESG considerations in state investments through an executive order last year. Chief Financial Officer Jimmy Patronis removed $2 billion of investments in BlackRock, an investment management firm over the issue. In January, DeSantis also called on the Legislature to permanently ban ESG-linked investments.

The bill now heads to the Senate floor. The House version of the bill (HB 3) passed that chamber last month.