https://www.cnn.com/2022/08/17/politics/desantis-pension-rul…
IMO, there is lots of risk for the state if the Florida pension funds are not allowed to consider ESG risks that impact returns.
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Florida pension funds are not allowed to consider ESG risks that impact returns.
As the article says, this is part of the Gov’s “anti-woke” push, of which his taking revenge on Disney for being openly supportive of LGBTQ rights, was another part. We have discussed this risk to corporations before, where they are compelled to toe the official government line, or face retribution. Same thing is happening in Texas and West Virginia.
Steve
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We have discussed this risk to corporations
It is also a major risk to the state. If investments avoiding ESG risks have lower returns than investments considering them, then the beneficiaries can legitimately sue the state (regardless of state law) due to negligence and malfeasance regarding those investments. Retirees (and any other person with a financial interest in the payouts of the retiree investment funding–which could be many thousands of past AND present state workers) winning such a lawsuit, with significant ongoing added payouts, would impose a large tax burden on generations of taxpayers because it takes 40+years for the investments to prove themselves.
…then the beneficiaries can legitimately sue the state (regardless of state law) due to negligence and malfeasance regarding those investments.
Good luck with that. In Florida, the Gov has complete control over who becomes a justice of the state supreme court.
In Florida, state supreme court justices are selected through assisted appointment with a governor-controlled judicial nominating commission. Justices are appointed by the governor with the assistance of a commission with a majority of members selected by the governor. As of August 18, 2022, there are 10 states that use this selection method.
https://ballotpedia.org/Florida_Supreme_Court
Plenty of incentives offered to corporations are at the discretion of the government. Florida granted Disney a special development district as an incentive to build Disney World. When Disney management spoke out against a new state LGBTQ-hostile law, the Gov had the special development district repealed.
A Florida county prosecutor, elected by a vote of the people, said he would not prosecute anyone for violating a new state abortion restriction law, or a law against providing gender affirming medical care for trans minors. He did not actually refuse to prosecute an exiting case, he said he would refuse to prosecute, should such a case arise. The Gov removed him from office, and replaced him with a lickspittle. The, now, former prosecutor is suing alleging violation of his 1st amendment free speech rights, violation of the state constitution that grants prosecutors discretion on which cases to prosecute, and overturning an election.
Texas excludes certain large banks from participating in municipal bond auctions because the Gov has decided the banks’ management is “woke”.
West Virginia has banned a certain financial company from being a state contractor, due to the Gov’s assessment that management is “woke”.
This is the sort of minefield I had to navigate every day, in most of the places I worked. The “JC” had built an echo chamber around himself, and filled it with yes-men that fed every delusional notion the honcho had. I had to keep my yap shut, and toe their line, no matter how ludicrous, to keep my job. This is the risk that corporations increasingly face now.
Steve
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In Florida, the Gov has complete control over who becomes a justice of the state supreme court.
We are looking at a time period longer than the current occupants of the court will be on the court.
Plus, we are talking about financial malfeasance and dereliction of official duties by the state, so it also means the court members are going to be underpaid as well.
It is also a major risk to the state. If investments avoiding ESG risks have lower returns than investments considering them, then the beneficiaries can legitimately sue the state…
IIRC, the Florida law says that pension funds mangers must concentrate on profitability. Thus, if ‘ESG firms’ have higher returns then there is no problem in investing in them.
DB2
if ‘ESG firms’ have higher returns then there is no problem in investing in them.
Ah, but that is the core of the problem.
Florida retirement investments will ignore the ESG investments entirely, thus earning LOWER RETURNS over an extended period of time and be unable to pay required benefits to all retired employees.
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Ah, but that is the core of the problem.
Florida retirement investments will ignore the ESG investments entirely…
Do you have a link for that?
For example, if Kellogg had both a higher stock return and a higher ESG score (by whoever scores these things) than General Mills then the pension fund couldn’t use the higher return criteria to invest in Kellogg?
DB2
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For example, if Kellogg had both a higher stock return and a higher ESG score (by whoever scores these things) than General Mills then the pension fund couldn’t use the higher return criteria to invest in Kellogg?
Nope, because the objective is to punish the company for being “woke”.
Steve
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For example, if Kellogg had both a higher stock return and a higher ESG score (by whoever scores these things) than General Mills then the pension fund couldn’t use the higher return criteria to invest in Kellogg?
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Nope, because the objective is to punish the company for being “woke”.
As requested above, do you have a link for that?
CNN writes that:
www.cnn.com/2022/08/17/politics/desantis-pension-rules-esg-i…
“In new draft rules posted Monday on the website of the agency that oversees Florida’s pension fund, state investment managers can weigh only the risk or return of an investment when directing the state’s $200 billion in assets.”
Here is a draft of the bill:
www.sbafla.com/fsb/Portals/FSB/Content/Trustees/2022/FINAL%2…
It says that:
“The evaluation by the Board of an investment decision must be based only on pecuniary factors…Pecuniary factors do not include the consideration of the furtherance of social, political, or ideological interests. The board may not subordinate the interests of the participants and beneficiaries to other objectives and may not sacrifice investment return or take on additional investment risk to promote any non-pecuniary factors.”
So, if companies that are highly rated for ESG (by whoever and however they are scored) have better financial performance then the Florida funds can invest in ‘ESG companies’.
DB2
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So, if companies that are highly rated for ESG (by whoever and however they are scored) have better financial performance then the Florida funds can invest in ‘ESG companies’.
The clips you posted sound pretty. I would not count on the Gov’s benevolence, and his wrath can impose real damage, hence, real risk, on any company he is motivated to attack.
Steve
So, if companies that are highly rated for ESG (by whoever and however they are scored) have better financial performance then the Florida funds can invest in ‘ESG companies’.
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The clips you posted sound pretty. I would not count on the Gov’s benevolence, and his wrath can impose real damage, hence, real risk, on any company he is motivated to attack.
Could happen. What I was pointing out is that the bill doesn’t discriminate against ESG, it says to ignore it. Big difference.
DB2
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“In new draft rules posted Monday on the website of the agency that oversees Florida’s pension fund, state investment managers can weigh only the risk or return of an investment when directing the state’s $200 billion in assets.”
That is the problem. Companies lie all the time about costs–particularly ESG problems they do NOT want to include as a possible risk to the STATED returns to possible investors.
We see that problem here in MN. Pipeline company wanted to build a replacement to an existing pipeline. The ESG risks WERE NOT INCLUDED in the ROI analysis. The company has a HISTORY of ignoring ESG costs until forced by the courts.
https://www.minnpost.com/community-voices/2022/08/the-hyperb…
What happens when the company has problems because it can’t manage the ESG risks it ignored historically?
Jerry,
Companies that do not shift to a much better ESG set of positions will be sued and lose a lot of the time. The public wont put up with BS any longer.
What happens when the company has problems because it can’t manage the ESG risks it ignored historically?
I drove over to Kazoo yesterday afternoon for my 50th High School reunion, postponed from last year due to the plague. I pried open my wallet and got a hotel room, as I was disinclined to try to drive home at midnight, 120 miles down the freeway, in a driving rain, through the several construction zones on I-94.
While cooling my heels in the hotel room for a bit, I flipped around the TV dial.
Stopped for a moment on Fox Noise. Banner across the screen saying something to the effect of “pushback against ‘woke’ investing”, with the guest promoting his family of mutual funds whose investing principle is to only invest in companies who openly and explicitly disregard all environmental and human impacts of their activities.
I am not finding that interview on line at the moment. Here is an interview from several days ago, on bubblevision. The guest is rolling out the same talking points I heard, that any sort of “woke” policies, by a corporation, by definiton, lead to misallocation of capital and reduced shareholder return.
So, all the Florida pension fund has to do is accept that proposition, that “woke” policies, by definition, hurt investor return. Should not be difficult to make such an assertion stick. How many times are people still telling us the path to economic nirvana is to shower the “JCs” with money, in spite of 40 years of lack of evidence that it works, for anyone other than the “JCs”?
Strive founder Vivek Ramaswamy on new anti-ESG fund, ‘anti-woke’ investing
https://www.youtube.com/watch?v=EMQLDIZ5wBk
DrBob, there is the link you asked for, the one that provide the excuse for the pension fund to purge any company with any sort of “woke” policies,
Steve
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The largest factor in pension fund investment returns is the “skim rate” – what the pension fund loses to fees, commissions and trading costs.
If the pension fund is paying the 2% per annum that Wall Street’s business model demands, taxpayers have to put twice as much money into the fund over time – funny how compounded investment returns work that way.
intercst
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