DeSantis leads charge to block pension fund from socially aware investments

TALLAHASSEE — Florida leaders moved forward Tuesday with preventing investment decisions that promote “social, political or ideological interests” in the state’s $200 billion pension fund.

Gov. Ron DeSantis, Attorney General Ashley Moody and state Chief Financial Officer Jimmy Patronis took aim at investment practices that involve what are known as “environmental, social and governance ratings,” which can include such things as taking into account climate change.

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The three Republicans, who serve as trustees of the State Board of Administration, approved a resolution that directed pension-fund managers against using so-called ESG ratings when investing state money.

DeSantis said the intent of Tuesday’s move was to keep pension systems from becoming “roadkill in somebody’s ideological agenda.”

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DeSantis said he plans to work with legislative leaders to put the changes into state law.

ESG ratings can involve considering a wide range of issues in investments, such as companies’ climate-change vulnerabilities; carbon emissions; racial inequality; product safety; supply-chain labor standards; privacy and data security; and executive compensation.

Larry Fink, CEO of the BlackRock asset-management firm and a leader in the use of the metrics, said in his 2022 letter to corporate executives that companies using ESG standards are “performing better than their peers.”

“Stakeholder capitalism is not about politics,” Fink wrote. “It is not a social or ideological agenda. It is not ‘woke.’ It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper.

The State Board of Administration oversees the Florida Retirement System for government employees, along with other state investment funds.

Lamar Taylor, interim executive director of the State Board of Administration, said the use of ESG ratings has increased as more capital has been steered into the hands of a limited number of investment managers and because of new rules from the U.S. Department of Labor.

“We think these phenomenon together create both the means and the potential incentive for certain investment managers to elevate the achievement of certain political, social and ideological objectives over and above financial return objectives for the funds they manage,” Taylor said.

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