The Blubber

On Tuesday, Florida Governor Ron DeSantis signed into law a bill that prohibits state officials from using public funds to support environmental, social, and governance (ESG) objectives and bans the sale of ESG bonds. The legislation represents one of the most extensive actions taken by U.S. Republicans against sustainable investing initiatives and sends a clear political signal from DeSantis, who is considered a potential presidential contender.

Republicans, including those from states with significant energy production, argue that many corporate executives and investors have become distracted from financial returns as they increasingly consider issues such as climate change and workforce diversity. "We want them to act as fiduciaries. We do not want them engaged on these ideological joyrides," DeSantis stated during a webcast event where he signed the bill.

Analysts note that the Florida legislation goes beyond other state-level anti-ESG bills, raising concerns among business groups about potential financial risks. The law also raises questions about its practical implementation. For example, fund managers associated with entities like Florida's large pension fund will be required to include disclaimers in certain communications with portfolio companies, clarifying that the communications do not represent the views of Floridians. Fund managers who fail to include sufficient disclaimers could face regulatory consequences, according to Joshua Lichtenstein of law firm Ropes & Gray. However, Lichtenstein noted the oddity of speaking "on behalf of some of your clients."

The new law also prohibits the sale of ESG bonds, which are commonly used to finance renewable energy projects or reduce borrowing costs for entities that meet criteria such as gender diversity or greenhouse gas emissions targets.