Watch out, woke investors—Ron DeSantis is coming to get ya, even if it means screwing over his own constituents.
On Tuesday, DeSantis signed into law a bill that forbids state and local governments in Florida from investing public money into funds and entities that consider environmental, social, and governance factors—or ESG. House Bill 3 is a sweeping law with lots of implications for both money within the state as well as the GOP’s larger culture wars.
The origins of bills like these began in Texas, when the state passed a law in 2021 that forbid it from doing business with banks and other entities that “boycott” the fossil fuel industry. Since then, the anti-ESG movement has picked up steam in statehouses around the country, as at least seven states in addition to Florida have passed laws or adopted measures to target ESG investing. GOP lawmakers in Congress have also tried to take the fight national, by targeting Biden administration policies meant to encourage ESG. Culturally, anti-ESG sentiment has spread like wildfire on the right, with even that weird guy who draws Dilbert weighing in as being against “woke” capitalism. It’s no wonder that DeSantis, who is eyeing a presidential run, has thrown his weight behind this bill. (One of his rivals has designed his entire campaign around being anti-ESG.)
The Florida bill is like a super-mutant, supercharged version of bills passed in other places. Under the new law, it’s not only investment funds directly managed by the state of Florida that won’t be able to do business with banks deemed too “woke.” Entities from the state parks system to schools and universities that get any state money at all must revamp their investment portfolios.
“Most of the attacks on ESG investing that have passed so far have been, in some cases, pretty broad,” Jordan Haedtler, an independent climate financial policy consultant, told Earther. “This [Florida bill] goes further, and clarifies that any entity that receives state government funds would be affected.”
The restrictions don’t stop there. The new law also outlaws the sale of ESG bonds, which are commonly used to finance climate-friendly clean energy or resilience projects, and also prohibits banks from not lending money to individuals based on a host of factors, including “engagement in the exploration, production, utilization, transportation, sale, or manufacture of fossil fuel-based energy, timber, mining, or agriculture.”
Incredibly, the bill’s own sponsors seem to be in the dark as to how all these new restrictions will actually play out on the ground—and how they’ll affect everyday Floridians.
“I’m sorry I forgot my magic 8-ball,” Republican State Rep. Bob Rommel told a Democratic colleague when asked during a hearing in mid-March about how lawmakers would ensure Florida taxpayers don’t lose money if the bill passes. In a follow-up question about the bill’s green bond provisions, Rommel said that the state would be allowed to use a bond for projects like building a dike to protect portions of the Everglades.
“But if you’re saying, ‘hey, we’re selling fairy dust to protect people from some unknown character in the world, they would be disqualified,” he continued.
Unfortunately, the bill doesn’t set parameters for making this distinction—and a lot of bonds used for climate mitigation projects, like building protections in the Everglades, are ESG bonds.
“It’s unclear what the impact of this provision is going to be, but based on [Rommel’s] description, it would invalidate some socially responsible bonds that would support some of the projects Rommel is describing,” Haedtler said. “You could say the Florida attorney general is now empowered to decide which environmental projects they care about, and which they don’t, and which green bonds they want to approve and which they want to scrutinize. That doesn’t make me feel very good.”
Many of the other states that have passed or considered anti-ESG laws have seen a lot of fallout from their decisions. Lawmakers in Indiana and North Dakota earlier this year backed down from proposed anti-ESG bills over concerns they would hurt small businesses; a board overseeing a Kentucky retirement fund in February told the state it would not comply with an order to divest from BlackRock. One study issued in January found that the countrywide push against ESG could cost taxpayers more than $700 million in higher payments. In January, Haedtler’s consulting firm issued a memo that estimated that the cost of Florida’s bill could be more than $300 million to taxpayers.
Ultimately, the Florida bill illustrates that Republican lawmakers are more interested in using ESG as a cudgel against the idea of “wokeness” than actually passing laws and policies that would benefit their constituents.
“The broader principle and the tool this gives them to preempt big blue cities or to restrict debt issuance in communities that they don’t like, that don’t vote for them, is seemingly more important to them than the fact that sometimes in less high-profile ways these bills can backfire and harm constituents that do vote for them,” Haedtler said.