DeSantis to cut off FRS investments to 'woke' companies

Northwest Florida Daily News (Fort Walton Beach)

Gov. Ron DeSantis plans to deploy the $199-billion Florida Retirement System Tuesday to the front lines of a 2022 culture war, mid-term election.

DeSantis, who has emerged as a leading warrior against what he and his supporters call a woke agenda and “ideological corporate power,” wants to prohibit the state from considering what are known as environmental, social governance (ESG) standards when investing state money in companies.

ESG is a 20-year old movement to encourage corporate responsibility by encouraging investment in companies that have policies addressing issues like climate change, human rights and racial injustice.

FRS is the pension fund for more than a million public sector workers, retirees and their surviving spouses. More than 90% of its revenue ($46.4 billion in 2021) is investment income with the remainder ($4.6 billion) contributed by the state, school boards, local governments and their employees.

The fund paid out $7.5 billion in benefits last year, according to a state audit.

DeSantis, who is up for reelection in November but also widely considered as a Republican presidential frontrunner for 2024, told conservative radio host Glenn Beck over the weekend that when his rules to prohibit ESG standards in investing pass, they will “make a big splash.”

“We’re a big pension system,” DeSantis told Beck. “And some of these businesses are going to have to choose between going down the ESG rabbit hole or being able to be invested with the State of Florida.”

According to the global management consulting firm McKinsey and Company, the State Board of Administration, which administers the fund, controls an investment fund more than the total amount of money invested in real estate in Canada, the United States and Mexico in 2019.

After an Election Day Cabinet meeting at the capital, DeSantis will lead the board in a discussion of new investment guidelines for the pension fund, the Florida Hurricane Catastrophe Fund ($11 billion) and Florida PRIME ($17 billion), a state-managed local government investment pool.

A draft of the DeSantis proposal, which comes after months of threats against “woke CEOs,” opines that “the Biden Administration has made clear its intention to encourage investment using ESG factors;” and then commits the state to investments “without considerations for nonpecuniary beliefs or political factors,” those that further “social, political or ideological interests.”

In other words, investors can consider only a company’s risk and the return on investment.

Jimmy Patronis, who as the state’s Chief Financial Officer is a SBA trustee, endorsed the proposal and said he was proud to stand with DeSantis and fight to “ensure protections against ESG ratings are codified into Florida law,” to prevent workers’ pension contributions from being used to further a cause.

“Our teachers, law enforcement officers and state employees, who have worked their entire lives in service to our state, shouldn’t have their pensions squandered because a business doesn’t align with some woke rating agency’s political beliefs,” said Patronis.

FRS is the gold standard under assault, Democrats say

Adam Hattersley, the Democrat who wants to replace Patronis as CFO and SBA trustee, said DeSantis and Patronis are proposing a solution to a problem that does not exist – there is no record of SBA using ESG to make investments.

“It’s an age-old tactic for politicians to create a problem and solve it to distract from real ones like a property insurance crisis,” said Hattersley, who charges Patronis was a “CFO who went AWOL” during the special legislative session on property insurance.

Analysts say FRS is the gold standard for state pension systems, routinely exceeding benchmarks for 20, 25, 30-year performance periods with annualized returns of 7.4%, 8.2%, and 9.0%.

In the COVID-ravaged economy of 2020 the fund return on investment was 28.7%. Last year it earned a net return of 29.4%.

The FRS portfolio includes investments in 10,174 companies worldwide and managers have averaged an annual 10.3% return-on-investment since 2008.

The stellar performance is because “we allow the experts to do their jobs without political interference,” said Sen. Loranne Ausley, D-Tallahassee, who represents more than 22,000 state workers. “This is just another of DeSantis’ extreme political moves and it is dangerous.”

Corey Simon, the Republican candidate challenging Ausley on the November ballot did not respond when asked for a comment.

Hattersley dismisses the proposal as political theater and “an absolute betrayal of the Reagan Republican Party.”

Hattersley says the change could open the door to the governor and CFO blocking investments in a company that offers diversity training.

“Government policing the internal ethics of a company is beyond unconservative or whatever the right word would be,” said the 44-year-old Hattersley, whose father was a registered Republican voter.

“Injecting the governor’s political agenda into affecting the lives, pensions, of a million Floridians is more then wrong,” said Hattersley. “It’s irresponsible,” and he added a possible violation of the trustees’ fiduciary responsibilities to workers and retirees.

Axios reported Wednesday that Consumers’ Research, a conservative group that targets “woke capitalism,” unveiled a multimillion-dollar campaign against BlackRock and its CEO Larry Fink for “weaponizing” retirement funds with its push for more ESG investments.

The digital news website reported that congressional GOP members “plan to make an assault on ESG a central part of their legislative and investigative agenda” if they win back the U.S. House. Democrats currently control the U.S. House and U.S. Senate chambers.

Push is the latest attack

line for the governor

The DeSantis anti-woke investment proposal comes on the heels of a contentious year in the Florida Legislature where Republicans and Democrats squared off on education policies, abortion access, voting rights, and minority representation.

Lawmakers at the governor’s urging approved a Stop the Wrongs to Our Kids and Employees (WOKE) Act, which prohibits the teaching of Critical Race Theory in public schools and blocks businesses from using practices or training that makes employees feel guilty because of their race, sex, or national origin.

Chief U.S. District Judge Mark Walker Thursday granted a temporary injunction to block enforcement of the Act while a challenge by three businesses proceeds. In his ruling, Walker described the Stop Woke policy as “bordering on unintelligible” and a violation of First Amendment rights.

When Disney’s CEO criticized Florida’s Parental Rights in Education law as hostile to LGBTQ students, lawmakers at DeSantis’ urging, repealed the company’s special self-governing status of its Central Florida theme park empire.

“What I’ve said is the State of Florida is the place where woke goes to die,” DeSantis told supporters in Pasco County Tuesday.

The SBA trustees will consider the anti-woke investment proposal Tuesday at the state capital.

James Call is a member of the USA TODAY NETWORK-Florida Capital Bureau. He can be reached at [email protected]. Follow on him Twitter: @CallTallahassee

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