DeSantis’ new rules for pension investments push Florida into battle with Wall Street

In new draft rules posted Monday on the website of the agency that oversees Florida’s pension fund, state investment managers can only weigh an investment’s risk or return when managing the state’s $200 billion in assets. The directive is DeSantis’ initial salvo against what he has called “ideological corporate power” and follows efforts by other state GOP leaders to target businesses that venture into the political arena.

DeSantis has criticized financial institutions and business executives for considering factors such as systemic racism and economic inequality when making business decisions, a practice known as environmental, social and governance, or ESG, investing. In an episode of Glenn Beck’s online show posted to YouTube on Saturday, DeSantis told the conservative commentator that he expected the new rules to “make a big impact” when passed.

“We’re a big pension system,” DeSantis said, “and some of these companies are going to have to choose between going down the ESG rabbit hole or being invested with the state of Florida.”

The rules are expected to be voted on next Tuesday when DeSantis, Attorney General Ashley Moody and Chief Financial Officer Jimmy Patronis meet as the State Board of Directors. Moody and Patronis are also Republicans and closely aligned with DeSantis.

The financial sector is the latest to draw the attention of DeSantis, a potential 2024 presidential candidate, for supporting what he sees as “woke ideology.” He previously targeted Disney for opposing a bill that would ban the teaching of sexual orientation and gender identity to young children. He championed a new law that limits how companies train their employees on issues like race and privilege. He also signed legislation requiring state universities to administer campus-wide ideological surveys aimed at eliminating bias against conservative viewpoints.

DeSantis has hinted at plans to challenge Wall Street since at least May. DeSantis addressed the Florida Bankers Association in Tampa that month, where he took shots at New York banks he accused of using their financial power to advance politics, two insiders told CNN. DeSantis singled out financial institutions that would not do business with gun makers and specifically called out JPMorgan Chase, which had a table of representatives at the event.

DeSantis suggested to the bankers that Florida could use its huge pension fund as a cudgel against these financial institutions. The state oversees about $200 billion in retirement funds and another $40 billion in other funds, according to the most recent monthly report from the State Board of Administration.

The ESG movement is based on the idea that companies should recognize that they have a role to play in addressing growing external threats, such as climate change and racial inequality. Conquering these systemic problems is not only better for society as a whole, they argue, but financially prudent in the long run. Among its most prominent adopters is Larry Fink, the CEO of BlackRock, a firm that manages $10 trillion. In his annual letter to corporate executives, Fink argued that companies that embrace ESG principles “perform better than their peers” and “enjoy a ‘sustainability premium.’

“Stakeholder capitalism is not about politics,” Fink wrote. “It’s not a social or ideological agenda. It’s not ‘woke.’ It’s capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers and communities your business depends on to thrive. That’s the power of capitalism “.

Florida’s new rules stop short of declaring that state pension managers can’t consider environmental factors when making investment decisions, a key pillar of the ESG investment movement. Other states, including Texas and West Virginia, have proposed punishing companies that divest from fossil fuels in an effort to combat a move toward green energy projects and away from oil and coal, according to reports from The New York Times i NPR.

DeSantis has accused the ESG movement of opposing U.S. energy independence, but Florida’s draft rules do not include punitive measures pursued by other states. Instead, the proposed policy explicitly states that “social, political or ideological interests” are factors that state investment managers cannot take into account.

In a statement to CNN, DeSantis spokesman Bryan Griffin said, “Banning pension investments based on political and ideological goals will include ESG-style favoritism toward entities that use the environment as a cover for their politics.”

“At the same time, the governor will continue to advocate for the environment through state initiatives such as Everglades restoration, water quality improvement programs and red tide research,” he added.

Under the new policy, pension fund managers would also have to exercise their voting power as shareholders “solely in the interest of the participants and beneficiaries” of the Florida Retirement System. Earlier this year, DeSantis criticized Twitter’s board for trying to undercut an offer from Tesla CEO Elon Musk to buy the social media website. DeSantis argued the board was not acting in the best interests of shareholders, and DeSantis said the state pension board pressured Twitter’s board to consider the offer.

“If this is politics, we will hold you accountable,” DeSantis said at a news conference in April.

DeSantis has accused financial institutions of putting politics ahead of profits. In a July news conference, DeSantis pointed to major banks refusing to do business with GEO Group, a private prison company based in Boca Raton that has operated detention centers for U.S. Immigration and Customs Enforcement .

(GEO Group CEO George Zoley gave $103,000 to DeSantis’ first campaign for governor, and the company has contributed $150,000 to the Florida Republican Party in the past year.)

“These activists cannot implement these policies through the ballot box,” DeSantis said. “People don’t want to abolish prisons, people don’t want to abolish ICE, people don’t want to defund law enforcement. And so they’re trying to do it through the back door, basically dumping some of these companies “.

At his July press conference, DeSantis proposed partnering with other conservative states to push out socially and environmentally conscious investment strategies using their combined shareholder power.

“What we need to do is get other like-minded states to have all the voting rights of our retirement systems used basically as a block,” DeSantis said.

DeSantis also said he hopes to introduce legislation that would go after credit card companies, banks and money transfer services that block access to their services for political or religious reasons.

DeSantis accused PayPal of freezing the assets of Moms for Liberty, an organization that is mobilizing parents for conservative education priorities, and previously criticized crowdfunding website GoFundMe for cutting off funds to truck drivers protesting coronavirus restrictions in Canada

PayPal had previously cut ties with a crowdfunding site used by the Proud Boys and other rioters in the January 6, 2021 attack on the US Capitol.

State Rep. Anna Eskamani, D-Orlando, wrote on Twitter that DeSantis was “Forcing businesses to work with Nazis.”

Presumptive Speaker of the House Paul Renner said this would be a priority for his chamber when lawmakers return to Tallahassee next year.

“This is a pocketbook issue,” Renner said at the DeSantis press event in July, “and we will not relent until we begin to dismantle this dangerous form of ESG.”


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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!