Florida governor Ron DeSantis has been trying to “combat ESG”. Earlier this month, DeSantis signed a bill into law banning managers of state funds from considering “any social, political or ideological interests” in investment decisions.

This legislation applies to the $235 billion Florida Retirement System Trust Fund and several smaller state funds administered by Florida State Board of Administration. It has been widely reported that the legislation prohibits these funds and their investment managers from incorporating ESG into investment decisions or making impact investments. “We are [taking] action to combat ESG,” DeSantis said when signing the bill. “[ESG] is an attempt by elites to impose ideology through financial institutions and our economy.”

Florida RSTF, meanwhile, is an LP in several impact-oriented funds, including Blackstone Green Private Credit III, TPG Rise I and II, Summa Equity II and III and Actis Energy 5, according to New Private Markets’ database. It has also repeatedly backed managers that have become vocal proponents of ESG, such as Carlyle (a driving force behind the ESG Data Convergence Initiative) and Apollo Global Management (which has ESG “rooted in [its] fundamental investment process”).

Will this legislation prompt a step-change in Florida RSTF’s private fund investments?

Apparently not: it seems to be business as usual for Florida SBA. The legislation “simply ensures that Florida’s long-standing practice of focusing solely on pecuniary factors when making pension investments remains in place going forward,” a Florida SBA spokesperson told NPM via email this week. Will Florida SBA seek liquidity options for its impact fund investments? The spokesperson said: “All SBA investment decisions are made singularly and solely for the purpose of maximizing financial return, managing risk, defraying reasonable costs and diversifying plan assets.”

This appears to be in line with House Bill 3. In his post-signing speech, DeSantis alluded to materiality in ESG being permitted: “You can invest in anything that makes sense. So there may be an ESG [investment] approved if that’s a good value, you can do it.” So if fund managers’ ESG considerations are material and not moral, Florida SBA should have no objection.

In reconciling the legislation and Florida SBA’s apparent ‘business as usual’ approach, there are a couple of conclusions to draw.

First, ESG does not always mean woke politics. Pension fiduciaries should consider ESG factors for risk management, value creation, cost-cutting or compliance. Even one of the US’s most conservative state administrations recognises that.

Second, impact fund managers targeting market-rate returns can be optimistic about raising capital, even from institutions in “anti-ESG” states.