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What a ban on ESG investing means for Floridians

Pleiades Strategy released its 2023 Statehouse Report tracking anti-ESG legislation.
Pleiades Strategy
Pleiades Strategy released its 2023 Statehouse Report tracking anti-ESG legislation.

Taxpayers and pensioners in Florida may soon feel the financial effects of a ban on ESG investing, which became law this year.

ESG stands for environment, social and governance. It's basically a tool for consumers and investors to have better information about how a company responds to risks like climate change, how it impacts the environment and surrounding communities, and how it governs itself.

Kelly Mitchell is a Senior Analyst for Documented, an investigative watchdog group. She said the anti-ESG movement has actually been “deeply unpopular” across the country at the state level.

But Mitchell told WUSF's Jessica Meszaros, dark money played a role in getting the measure passed in Florida.

How does this ban affect every day Floridians?

 Kelly Mitchell, analyst for the investigative watchdog group Documented.
Kelly Mitchell
Kelly Mitchell, analyst for the investigative watchdog group Documented.

Potentially, it could harm taxpayers and pensioners in the state. So, when you tell investment managers what kind of risks they can evaluate, who they can do business with, what kind of banks they can do business with, it potentially raises the cost of investments. And it potentially reduces the amount of money that's going to be available to pensioners.

We've actually seen that play out in several states already. Texas was one of the first states to pass a restriction on ESG investing. And within the first eight months of that bill being put into effect, we saw that municipal governments across the state were paying almost half a billion dollars more to service bonds in their communities. That's money that's being diverted away from schools, from roads and being put into paying for new bonds because they were restricted in what kinds of firms they could do business with.

Who's for and against banning ESG?

One of the surprising twists in all of this is that this anti-ESG movement has actually been deeply unpopular at the state level. So, over 160 bills were introduced this year, but many of them failed. The majority of them failed, and they failed in some of the deepest, reddest states in the country in places like North Dakota.

And they didn't fail because environmentalists were out protesting and climate activists are out protesting. They failed because bankers’ associations, chambers of commerce, and pension managers came out with very serious concerns about what this would do for compliance cost and what it would mean for how firefighters and pensioners would be able to retire in the long run.

Do we know why this was successful in Florida? Does it have anything to do with DeSantis' presidential run and the culture wars going on in Florida right now?

Yeah, Gov. DeSantis has made this culture war 'woke capitalism' sort of a hallmark of his administration. I mean, at the same time that major insurers are pulling out of the state -- people aren't able to insure their homes because of climate risk -- the DeSantis administration is choosing to launch an investigation into Bud Light because they had a sponsored Instagram post. So, I think to the extent that the legislature follows the governor's lead on this stuff, he's decided that this is going to be his main message and his main tool for governing.

And what has Documented found in terms of dark money backing anti-ESG campaigns?

There's a ton of dark money behind these campaigns. A lot of it has come from Leonard Leo. So, Leonard Leo is sort of most famous for installing a number of prominent Supreme Court justices through his network of nonprofits and organizations.

He has infused a ton of money into this fight, millions of dollars into too many of the groups that are behind it, including the State Financial Officers Foundation, of which Jimmy Patronis of Florida is a member. He's put a lot of money into the Republican Attorneys General Association, which has also stepped up to join the anti-ESG fight. So, a lot of the leading voices in the anti-ESG movement are representatives of groups that have been infused with dark money from people like Leonard Leo.
Copyright 2023 WUSF 89.7.

Jessica Meszaros is a reporter and host of All Things Consideredfor WGCU News.
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