Florida Chief Financial Officer Jimmy Patronis is decrying President Joe Biden’s veto of legislation that would have reinstated a regulation barring pension managers from considering environmental and other nonpecuniary outcomes of investment decisions.
“With this veto, Joe Biden has notified asset managers that they are to ignore returns and focus on reengineering society,” Patronis said in a written statement.
Mondays’ veto was Biden’s first since assuming office. The legislation would have reinstated a Trump administration regulation barring use of “ESG” factors, meaning environmental, social, and governance, when investing pension money. The Biden Labor Department had overruled the Trump regulation.
ESG criteria are well established in global financial circles, the products of a United Nations initiative to look beyond the narrow bottom line and consider long-term consequences of investments in fields like energy, or the social implications of investments, or principles of sound corporate governance.
However, conservatives had been agitating against them, arguing ESG are a way for — as Gov. Ron DeSantis has put it — the “Davos” set to impose their “woke” political preferences on the rest of us at the expense of the maximum possible investment returns.
The Republican-dominated House voted to override the Biden administration regulation and the Senate, with the support of conservative Democrats Joe Manchin and Jon Tester, went along. See this Wall Street Journal report.
Biden cited “extensive evidence that environmental, social, and governance factors can have a material impact on markets, industries, and businesses.”
He continued: “But the Republican-led resolution would force retirement managers to ignore these relevant risk factors, disregarding the principles of free markets and jeopardizing the life savings of working families and retirees. In fact, this resolution would prevent retirement plan fiduciaries from taking into account factors, such as the physical risks of climate change and poor corporate governance, that could affect investment returns.
“Retirement plan fiduciaries should be able to consider any factor that maximizes financial returns for retirees across the country. That is not controversial — that is common sense.”
Florida’s State Board of Administration, comprising DeSantis, Patronis, and Attorney General Ashley Moody, voted in January to strip $200 million in state and local pension assets from pension managers that consider ESG, and Patronis had already begun moving $2 billion away from BlackRock Inc. for the same reason.
Legislating codifying this antipathy to ESG is pending in the Legislature.
Among Florida government officials, Patronis is second perhaps only to Gov. Ron DeSantis in opposition to ESG investing.
“If ESG is such a great investment it would not need a government regulation to protect it. This veto demonstrates that Joe Biden does not care about retirees, but he cares deeply for Larry Fink,” he continued. Laurence Fink is the founder of BlackRock.
“They’ve also built programs to monetize ESG — and it’s a lot of easier to shut down your competition through regulation instead of competing for returns. This veto should embolden the House to ramp up its efforts to investigate asset managers for their use of ESG in anti-trust practices.”