DeSantis signs sweeping anti-ESG legislation in Florida

May 2 (Reuters) – Florida Gov. Ron DeSantis signed into law a bill on Tuesday that prohibits state officials from investing public money to further environmental, social and governance objectives, and prohibits the sale of ESG bonds.

The bill is one of the most far-reaching efforts by US Republicans against sustainable investment efforts and a clear political message from DeSantis, a likely presidential candidate.

Republicans, including some of the energy-producing states, say many executives and investors have lost focus on returns as they increasingly take into account issues such as climate change and workforce diversity.

“We want them to act as trustees. We don’t want them to get involved in these ideological walks,” DeSantis said just before signing the bill in a webcast event.

Analysts said the legislation goes further than other state anti-ESG bills, even as business groups worry the efforts pose financial risks. The Florida law now raises some questions about how it will work in practice, analysts said.

For example, fund managers who work for agencies like the large state pension fund would have to include disclaimers in some communications with portfolio companies to make it clear that they do not reflect the views of Floridians.

Fund managers who do not include enough disclaimers could face regulatory action, said Joshua Lichtenstein of the Ropes & Gray law firm. But, he added, “it’s weird to say that you’re only speaking on behalf of some of your clients.”

The law also prohibits the sale of ESG bonds, a popular way to finance renewable energy projects or reduce debt costs for borrowers if they meet gender diversity or greenhouse gas emissions targets.

Lawyers and credit analysts said the new law could deny municipalities access to large ESG capital requirement funds. How officials interpret the terms is another question, said Thomas Torgerson, co-head of global sovereign ratings at DBRS Morningstar, which rates the debt.

“If we, as a rating agency, can’t assess environmental, social or governance risk, that creates a problem for us. There are climate and weather risks that are very relevant, especially in a state like Florida, and would be included in our rating assessment. credit risk”. Torgerson said.

Reporting by Isla Binnie and Ross Kerber, Editing by Rosalba O’Brien

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