UNITED STATES: Florida Governor Ron DeSantis on Tuesday signed a bill into law that forbids state officials from investing with taxpayer money to promote social, environmental, and governance objectives and prohibits the sale of ESG bonds.
The bill, which is one of the furthest-reaching efforts by American Republicans to date against sustainable investing initiatives, is a clear political message from Governor Ron DeSantis, a potential presidential candidate.
Republicans, including several from states that produce energy, claim that many executives and investors have lost their emphasis on profits as businesses increasingly consider topics like climate change and workforce diversity.
“We want them to act as fiduciaries.” “We do not want them engaged in these ideological joyrides,” stated DeSantis at a webcast event just before he signed the bill.
Analysts say that the law goes further than other state anti-ESG bills, despite concerns from industry organisations that the initiatives carry financial dangers. Florida’s legislation now brings up some questions about how it will function in practise, said analysts.
For instance, in some contacts with portfolio businesses, fund managers working for organisations like the state’s large pension fund would have to add disclaimers to make it clear they do not represent Floridians’ opinions.
Joshua Lichtenstein of the legal firm Ropes & Grey said regulators may take regulatory action against fund managers who don’t contain enough disclosures. But he continued, “It’s an oddity to say you’re only talking on behalf of some of your clients.”
The law forbids the sale of ESG bonds, which are a common way to finance renewable energy projects or cut debt rates for borrowers, provided they fulfil gender diversity or greenhouse gas emissions standards.
Lawyers and credit analysts warned that the new rule would prevent towns from accessing sizable pools of ESG-mandated cash. According to Thomas Torgerson, co-head of global sovereign ratings at DBRS Morningstar, which rates debt, another problem is how officials interpret the words.
“If we as a rating agency cannot assess environmental, social, or governance risk, that creates a problem for us.” “There are climate and weather risks that are highly relevant, especially in a state like Florida, and would be captured in our assessment of credit risk,” said Torgerson.
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