At the SBA trustees' most recent meeting on Jan. 17, they approved changes to the Florida Retirement System's investment policy that said ESG considerations will not be included in investment management of the defined benefit plan.
That was the latest salvo in Mr. DeSantis's war of words against ESG. The newly revised investment policy states 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."
In July, Mr. DeSantis announced plans to propose legislation that would prohibit the SBA from using any managers that consider ESG factors when investing the state's money.
On Dec. 1, fellow SBA trustee Mr. Patronis announced the state's Treasury department was terminating BlackRock from the management of $2 billion in the state's long-duration portfolio and its short-term investment portfolio due to what he termed in a news release as CEO Laurence D. Fink's "campaign to change the world" in utilizing ESG standards. Mr. Patronis' office has investment authority over those portfolios.
Later in December, Mr. Patronis announced he had sent a letter to the SBA's Mr. Taylor recommending the board terminate BlackRock from the $13.2 billion it manages. Bryan Griffin, Mr. DeSantis' spokesman, would not say whether the governor shared those sentiments.
Mr. Taylor referred questions regarding ESG and BlackRock to prior statements by the board.
In a Dec. 8 email, the spokeswoman, Ms. Oglesby, said: "Consistent with our fiduciary duty required by law, all managers used by the SBA are selected solely for the purpose of maximizing financial return, managing risk, defraying reasonable costs and diversifying plan assets, and any investment made by managers on behalf of the SBA is based on contractual terms that incorporate this fiduciary standard of care."
But regardless of Messrs. DeSantis' and Patronis' sentiments, they do not have any authority over the day-to-day investment management of the State Board of Administration. The SBA is a constitutional entity created in the Florida Constitution of 1885 and subsequent legislation delegates the executive director as its chief administrative and investment officer with broad authority.
The trustees have the authority to approve policies recommended to them by the executive director, but they are not involved in the actual investment management of the plan.
As SBA General Counsel Maureen Hazen put it a presentation at the board's Sept. 13 investment advisory council meeting: "This is what the executive director is authorized to do: Pretty much everything. I mean, not quite, but almost. And this goes back to sort of the governance model demonstrating that the trustees are really a policy board."
Despite being assigned significant investment authority, the executive director still must contend with the political risk referenced by Mr. Williams.
While Messrs. DeSantis and Patronis, who have both held their respective offices since January 2019, have made no secret of their disdain for BlackRock and the concept of ESG investing, Mr. Williams has in the past publicly praised BlackRock's embattled CEO.
In January 2020, Mr. Fink announced in an employee letter the firm would incorporate sustainable investment principles firmwide and intended to increase sustainably managed assets more than tenfold over the next 10 years to more than $1 trillion from $90 billion it managed at the time.
In an interview with P&I after the release of the letter, Mr. Williams said that Mr. Fink's letter contained "a very well-chosen message because it effectively bridged the philosophical argument, the tilting-at-windmills aspect of ESG principles that troubled many pension fiduciaries, and the economic reality of investments."
Mr. Williams then said that Mr. Fink's focus on the immediacy of climate change "that is occurring far faster than anyone expected" helped to make his letter "a good, sobering document for the investment industry and the world." He added at the time that while SBA had no ESG investment policy, staff was increasingly focusing on the impact of climate change, particularly rising sea levels along Florida's ocean coast.