DeSantis unveils more crackdowns on 'woke' investment practices

Standing behind a podium sign that said “Not Woke Politics,” Gov. Ron DeSantis unveiled more policy actions against what he says are elitist grabs in investment practices that harm the state and everyday citizens.

An outspoken critics of so-called environmental, social, and corporate governance companies, the governor said at a press conference in Naples that state lawmakers in the upcoming legislative session will be taking multiple steps in its ongoing crackdown on environmental, social and governance (ESG) investment policies that are elitist and discriminatory.

DeSantis, a likely Republican presidential candidate, has sought to capitalize on his opposition to "woke" thinking in corporate board rooms and college classrooms in Florida. Federal courts, however, have blocked his efforts to limit discussions of race, gender and other matters as an unconstitutional violation of free speech, although DeSantis is appealing these losses.

DeSantis said Monday that he expects other states will follow Florida with similar moves against "ESG," which has become a favorite target of conservative media.

More:After $22B loss, state workers pension system rebounding, facing new investing restrictions

Last year Chief Financial Officer Jimmy Patronis, a Republican and Florida Cabinet member, began decrying ESG investing. In December, Florida said it would freeze about $1.43 billion worth of long-term securities and remove investment firm BlackRock as the manager of about $600 million worth of short-term overnight investments with the goal of giving that business to other money managers early this year.

BlackRock at the time issued a statement accusing Florida of putting politics over performance.

Along with a policy statement adopted in January by DeSantis and the Cabinet that prohibits consideration of "social, political or ideological interest" when investing state money, the governor said he wants to enact the ESG ban into state law when the Legislature convenes its regular session in March.

ESG is a 20-year-old stakeholder capitalism movement grounded in the United Nation’s Principles for Responsible Investing.  Major investment firms like BlackRock, Vanguard, and State Street endorsed the UN statement, and collectively manage more than $22 trillion in assets.

Supporters say ESG steers investment in a socially conscious direction to combat ills such as pollution and poverty that impact investors and consumers. Companies can be rated on adherence to ESG-friendly policies.

Critics, like DeSantis, dismiss it as a public relations stunt that raises the cost of capital for business.

The $180 billion Florida Retirement System manages benefits for a million government workers, retirees, and their survivors. The new rules bar ESG from being a consideration in state investments.

The FRS fund lost $21.9 billion on Wall Street last year, according to a Department of Management Services audit. But the loss is not attributed to anything having to do with ideological investing.

The FRS strives to earn a return on investment of 4% plus the rate of inflation, but missed its mark in a market roiled by war in Europe, inflation and COVID-induced supply chain bottlenecks.

It was the first time in 13 years the state investment strategy failed to hit its mark and came on the heels of a record-breaking return of 29% in 2021.

DeSantis, though, is ready to expand his anti-ESG reach.

“We are also going to enact protections for Floridians against discrimination by banks and large financial institutions for their religious, political and social beliefs,” he said, speaking to a roomful of Republican supporters at Florida Southwestern State College in Naples.

He was joined by Senate President Kathleen Passidomo, R-Naples, and House Speaker Paul Renner, R-Palm Coast. State Rep. Bob Rommel, R-Naples, will be championing the measures this session, the governor said.

More:Gov. Ron DeSantis moves to prohibit state investments in 'woke' agenda

A third measure that DeSantis is calling for would prohibit banks and other financial institutions from using “so-called social credit scores" and making banking and lending decisions based on those scores.

The social credit scores are used by lending institutions to change people’s behavior and that needs to stop, the governor said.

“It’s to try and impose politics on what should be economic decisions,” he said. “They are using people’s pension money and 401(k) money effectively to advance a political agenda and that is not an appropriate use of corporate power.”

State lawmakers will be taking action this session so ESG practices are "not infecting" other decisions at the state and local level, DeSantis said.

The intent is to block the use of ESG ideologies in all investment decisions at the state and local level by ensuring that only financial factors are considered to “maximize the return on investment, protecting retirees and taxpayers", the governor said.

State and local governments will be prohibited from using ESG ideologies from their procurement and contracting decisions and local governments will be prohibited from issuing bonds shaded in any way in a socially conscious direction.

Passidomo echoed the anti-ESG themes of the governor, saying when it comes to her own stocks and investments, she did not know the investment decisions that were being made on her behalf by advisers who never came to her for her opinion.

“Do we ever vote for what stocks they are going to invest in? No, because we have, I know I have relied upon the company that invests my funds to invest,” she said. “We can’t do that anymore because those companies don’t really care about the return for us.”

DeSantis acknowledged that ESG policies may not be well understood by the average citizen. He capitalized on this ignorance by throwing out the unproven idea that behind ESG are other industrialized nations that don’t want the U.S. to produce more oil and gas.

“They do not want us to be energy independent,” he said, adding that policies that help China gain even a bigger competitive advantage is not something the state or country wants to do. “It’s also bad for our national security when you are doing this stuff with ESG.”

Speaking at Monday’s press conference was Brandon Wexler, a firefighter from Palm Beach County who owns Wex Guns Works in Delray Beach. He shared how Wells Fargo said it would be blocking his personal and business accounts because of ESG practices and how it nearly shut down his livelihood.

He had been banking with Wells Fargo for 25 years and the only explanation he was offered was that it was business decision. He learned the bank did a risk analysis on him and that was the basis for the decision. Soon afterwards, his Instagram account with 50,000 followers was shut down.

“They said that I’m the risk,” Wexler said. “I was able to transition my accounts to another bank. But what Wells Fargo did was completely wrong.”

Collier County Sheriff’s Lt. Tom Orr also spoke how he was frustrated to learn that his retirement fund was being managed, not for the best rate of return, but on ESG investment practices. Despite Orr's claims, given recent state actions that doesn't appear to be possible, if it ever was the case.

“When more companies invest based on earlier mentioned causes, they aren’t asking or even care about my opinion in these seemingly political decisions,” Orr said. “In actuality, they’re risking my retirement and others like me, such as teachers, state employees and EMS workers.”

John Kennedy of the USA Today-Florida Network's state capital bureau contributed to this report.

This article originally appeared on Naples Daily News: Local governments restricted on using ESG practices under proposal