© Reuters. Florida Governor Ron DeSantis walks outside the Treasury Department during his visit in London, Britain, April 28, 2023. REUTERS/Henry Nichols/File Photo
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Written by Isla Penny and Ross Kerber
(Reuters) – Florida Gov. Ron DeSantis on Tuesday signed a bill that bars state officials from investing public funds to promote environmental, social and governance goals, and bans the sale of ESG bonds.
The bill is one of the US Republicans’ furthest efforts yet against sustainable investment efforts, and a clear political message from DeSantis, the potential presidential nominee.
Republicans, including some from energy-producing states, say many CEOs and investors have lost focus on returns as they consider issues such as climate change and workforce diversity.
“We want them to act as confidants. We don’t want them to engage in these ideological amusement rides,” DeSantis said before signing the bill in an online broadcast event.
Analysts said the legislation goes further than the state’s other anti-ESG bills, even as business groups worry the efforts pose financial risks. Analysts said the Florida law now raises some questions about how it works in practice.
For example, fund managers who work for agencies like the state’s large pension fund will have to include disclaimers in some communications with portfolio companies to make it clear that they do not reflect the views of Floridians.
Joshua Lichtenstein of the law firm Ropes & Gray said fund managers who don’t include enough disclaimers could face regulatory action. But, he added, “It’s strange to say that you only speak on behalf of some of your clients.”
The law also prohibits the sale of ESG bonds, which are a common way to finance renewable energy projects or lower debt costs for borrowers if they meet targets for gender diversity or greenhouse gas emissions.
Lawyers and credit analysts said the new law could prevent municipalities from accessing large pools of capital mandated by the ESG. 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 can’t assess the environmental, social or governance risks that create an issue for us. There are significant climate and weather related risks, especially in a state like Florida, that would be captured in our credit risk assessment,” Torgerson said.