Florida’s “Anti-ESG” House bill is a sheep in wolf’s clothing

Here’s a note from Bob Eccles (also see this open letter to Governor DeSantis from Sasja Beslik):

In my last piece, I discussed how Florida House Bill 3 is neither the dagger in the heart of ESG the way Governor Ron DeSantis is celebrating it to be, nor an incredibly successful, if economically deranged, bill that some on the left are portraying it to be. When you just focus on the language of the bill, it’s actually quite reasonable for two basic reasons.

First, it emphasizes the investment decisions should be based on “pecuniary factors.” Since material ESG issues are, by definition, material I’m fine with that and have no problem with the term “pecuniary.”

The bill also makes clear that investment decisions should “not include the consideration of the furtherance of any social, political, or ideological interests.” Yep, totally fine with that too as this applies across the political spectrum.

When one puts the entertaining and self-indulgent political theater aside, the Florida bill suggests that when rationality supersedes ideology there is more in common across the aisle then currently appears to be the case. Based on this, Eli Lehrer of the R Street Institute and I are proposing a truce in the Red state/Blue state ESG Culture War. We first review actions in Red states that can be harmful to returns (e.g., excluding material ESG issues) and then do then same for Blue states (e.g., proposals to force divestment of, say, fossil fuel companies).

We state in our piece that, “This brings us to a proposed solution that both the left and right should be able to agree upon: clear fiduciary duty laws that define who is responsible for state investment, allow them to consider ESG factors only when they contribute to economic value creation and assure that state employees in defined contribution plans can select non-ESG options.”

From this it follows that there should be a clear depiction of fiduciary duty and “laws should clearly define an individual or specific group as a fiduciary.” We then argue that “states should adopt clear limits on making ESG investments in the first place” and that these should provide the same level of return to something not labeled as an ESG investment. Laws in North Dakota and Idaho contain language that is useful in this regard.

Eli and I are not naïve. We fully realize that the political gains from being anti-ESG and conflating it with “woke” mean that it’s highly unlikely we’re going to get a lot of immediate takers on our suggestion for a truce. That said, we are pointing out the obvious–. both Red and Blue states should be concerned about maximizing returns to their beneficiaries, despite the different language they may be using. In this way we are trying to play peacemaker, a worthy if unglamorous undertaking, compared to the fiery rhetorical fervor that has become emblematic of the ESG Culture Wars.