By Nick Hedley
The Florida Retirement System, which has assets worth $186.2 billion, will soon no longer be allowed to consider climate risk and other environmental, social and governance (ESG) factors when making investment decisions.
On August 23, the trustees of the State Board of Administration passed a resolution to amend the system’s investment policy statement and proxy voting policies. The board’s members are Governor Ron DeSantis, Chief Financial Officer Jimmy Patronis, and Attorney General Ashley Moody.
The system’s investment policy statement will be updated to require that all investment decisions are based on maximizing financial outcomes. In proxy voting, investment managers will be required to focus purely on investment return considerations.
The State Board of Administration will also prepare a report on the policies around voting practices and will submit its report to the trustees by December 15, 2023.
While discussing the resolution, DeSantis said it was aimed at ensuring that pension fund members were no longer “roadkill in somebody’s ideological agenda.”
The state would seek statutory codification of the requirements that the pension system disregard ESG factors, and Florida would seek to join forces with other states “to be a counterweight to ESG.”
Lamar Taylor, interim executive director and chief investment officer of the State Board of Administration, said ESG investing was a growing trend due to regulatory changes and the increased adoption of passive investment strategies, which had steered capital towards the likes of BlackRock.
There was now an incentive for investment managers to prioritize the achievement of “ideological objectives” rather than financial objectives, Taylor said.
It was therefore important for the board to ensure that financial returns were never “subordinated to the political, social and ideological objectives of others,” Taylor said.
As of end-June, the State Board of Administration's total exposure to oil and gas assets is $6.8 billion.
Patronis, meanwhile, said ESG is "un-American because global asset managers are using the woke standards to reengineer society through billion-dollar industries."
He singled out the insurance industry, saying that because insurers are increasingly considering climate and other risks in their policies, “a lot of woke businesses will get better insurance products, while others who ignore ESG criteria may not get any coverage."
"Meanwhile, as certain insurance companies have joined the cult of ESG, Florida is experiencing a hardening insurance market. If insurance companies are charging a premium for ESG, then we need to know about it. We know that asset managers are telling insurers to focus more on climate change, or they’ll lose money, or be sued. Or both."