When Gov. Ron DeSantis announced last week that Florida would be cracking down on “woke” banking and other corporations, PayPal reacted immediately by unfreezing money in the account of the conservative group Moms for Liberty.
A month prior, when DeSantis spoke at the group’s summit in July, PayPal stopped processing their monthly donors and would not let them transfer out any money already in their account. The action was presumably tied to the organization’s ideological views.
Instances just like this one are why DeSantis is working hand in hand with Republican state policymakers to stop the rise of environmental, social, and governance (ESG) standards. It’s a move that, if successful, would go a long way toward preserving individual liberty and advancing free markets.
ESG metrics are a social credit scoring system designed to transform society by changing the way businesses and, in some cases, their customers are evaluated. Under ESG, companies are awarded or punished with scores based on their commitment to causes favored by elites, not solely traditional business considerations, such as profit, revenue, the quality of goods and services, and employee satisfaction.
According to a press release issued by DeSantis’s office, the governor says he plans to sign legislation during the 2023 legislative session that would “prohibit big banks, credit card companies, and money transmitters from discriminating against customers based on their religious, political, or social beliefs,” effectively limiting the use of some ESG metrics by financial institutions.
DeSantis’s legislation would also prevent State Board of Administration (SBA) “fund managers from considering ESG factors when investing the state’s money.” It would also “mandate that SBA fund managers focus solely on maximizing returns on investment for Florida’s retirees.” (In Florida, the State Board of Administration is tasked with managing public investments and funds.)
DeSantis’s move to target the use of ESG can’t come soon enough. Countless powerful, woke corporations, banks, and Wall Street investors now broadly employ ESG scores to impose leftist policies through business activity — all without needing to pass a law through Congress or a state legislature. According to the accounting firm KPMG, thousands of companies worldwide use ESG, including 82 percent of large American businesses.
Non-economic, non-business metrics are used in ESG scoring to reward firms for operating in defiance of market forces, often to achieve a social justice cause. For example, the ESG model backed by the World Economic Forum and International Business Council rates companies based on the “Percentage of employees per employee category, by age group, gender, and other indicators of diversity (e.g. ethnicity).”
Thus, under the WEF-supported ESG system, a firm with the “incorrect” ratio of Asian to Hispanic employees — a measure that can only be subjectively defined — could receive a lower ESG social credit score than a company that sells lower-quality products but has what is considered by elites to be a more desirable ratio of certain ethnic groups.
Companies that fail to adopt parts of the Biden administration’s climate change agenda, consume too much water, or fail to adequately support community activism are also punished under many ESG models.
Major American banks such as Bank of America, investment firms such as BlackRock, and large-tech firms like Microsoft have vowed to use ESG scores to help change society in ways that align with many left-leaning causes. Although many ESG metrics are focused on environmental and climate causes, left-wing elites have also used ESG scores to deny capital or payment services to gun manufacturers and other legal businesses.
Additionally, corporate leaders have used ESG and related measures to discriminate against those who hold social and political views they disagree with, just like Moms for Liberty.
The language in DeSantis’s proposal would prevent some forms of ESG discrimination, and, perhaps even more importantly, draw substantially more attention to this vital issue. Should wealthy institutions colluding together decide which products and services are available to consumers, what individuals can say on virtually all social media platforms, and determine U.S. energy policy? Or should democratically elected representatives, customers, employees, and the American people make those decisions? That’s what is at stake in the battle over ESG.
However, although there is much to appreciate about DeSantis’s proposal, it is not perfect. It appears that DeSantis’s plan would not prevent all forms of ESG discrimination. Even if his proposal were to become law, banks could, for example, refuse to provide services to customers who choose not to purchase electric cars or who own “too much” land. Additionally, nothing in DeSantis’s plan would stop financial institutions from seeking to punish companies for having the “wrong” employee demographic composition.
Despite these flaws, the DeSantis plan, which has already received support from leaders in the Florida state legislature, remains a huge step toward ensuring ESG does not consume every part of Florida’s economy. And because of Florida’s size and influence, it is likely DeSantis’s support for anti-ESG measures will spread to other states.