State Pension Funds Defy Anti-ESG Laws When Voting Their Shares, Watchdog Charges

Foundation says voting records reveal 'deep state' within red states

State Pension Funds Defy Anti-ESG Laws When Voting Their Shares, Watchdog Charges
Florida Gov. Ron DeSantis scorns left-wing ideology, saying "Florida is where 'woke' goes to die" at a campaign stop in rural northern Florida on Nov. 3, 2022. (Nanette Holt/The Epoch Times)
Kevin Stocklin

Conservative states working to keep state funds out of the environmental, social, and corporate governance (ESG) movement are finding that, when it comes to state fund managers, you can lead them to water but can’t always make them drink.

Despite recent laws in states like Florida and Ohio banning the use of municipal dollars for political causes, fund managers are continuing to vote the shares owned by state pensions to support the climate agenda, racial equity and abortion rights, according to an investigation of voting records by the American Accountability Foundation (AAF).

Simultaneously, pension managers are also voting against shareholder proposals that would examine companies’ exposure to China, the AAF reported.

“I don’t like this term, but you essentially have a deep state within these pension programs that is not listening to elected leadership,” AAF President Tom Jones told The Epoch Times. “The elected leadership has given very clear guidance on this: Here’s what we want you to do regarding ESG, this is what the voters of our state have said they want,” Jones said, but fund managers continue to vote shares according to their own personal beliefs.

Under the slogan of “where ESG goes to die,” Florida has been one of the most aggressive states working to remove politics from state investments.

In August 2022, Florida Gov. Ron DeSantis, together with trustees of the State Board of Administration (SBA), passed a resolution that investment decisions regarding state funds “must be based only on pecuniary factors, [which] do not include the consideration of the furtherance of social, political, or ideological interests.”

On May 2, 2023, DeSantis signed into law a bill that barred state officials from using public money to promote ESG goals.

Florida has also taken other steps against the ESG movement, such as barring banks from imposing personal social credit scores on their customers.

Jimmy Patronis, the state's chief financial officer, stated that Florida was “fighting back against ESG and social credit scoring … Floridians deserve a banking system that works for them and not some corporate activists.”

“To participate in banking with state or local governments, financial institutions will have to sign an attestation that they will not discriminate against individuals or businesses on the basis of ESG standards,” Florida Deputy Chief Financial Officer Frank Collins told The Epoch Times.

Despite this, Florida’s SBA, which manages the state’s pensions, voted for a resolution at Boeing on April 18, requiring race and gender equity audits, the AAF reports. On May 4, the SBA voted in support of a “Diversity and Inclusion” audit at UPS. The SBA voted for climate activism resolutions at Berkshire Hathaway on May 6, and at UPS on May 4.

In Ohio, the state senate voted 26-to-7 on May 10 to ban the use of state money for the purpose of "influencing any social or environmental policy or attempting to influence the governance of any corporation” toward these goals.

However, the AAF report cites instances such as the Ohio Public Employees Retirement System (OPERS) voting for a resolution at AT&T to block the company from donating to pro-life lawmakers; voting for a resolution at Home Depot against donating to police foundations; voting for racial equity audits at Disney and Home Depot; and voting for a “net zero emissions audit” at ExxonMobil.

The Ohio Public Employees Retirement System, however, denied that political issues are a factor in how they manage state funds.

“OPERS does not permit ideologies to influence our investment or proxy voting decisions,” Michael Pramik, OPERS spokesman, told The Epoch Times.

“Our investment objective is to maximize returns within a reasonable risk framework, thus supporting the system’s mission of providing secure retirement benefits to our members,” he said. “We make investment and proxy voting decisions according to our investment policies.”
OPERS investment policies do not include ESG or other political goals.

ESG Shareholder Proposals Escalate

A March 2023 Wall Street Journal report stated that the number of shareholder proposals related to ESG has increased from about 600 in the 2020 spring annual meeting season to 682 so far this year.

“What we’ve seen is that the left has very significantly captured the leadership space in the financial sector,” Jones said.

But as conservatives begin to follow the same path, the number of shareholder proposals against ESG initiatives has increased fourfold, from fewer than 20 in 2020 to 74 this year.

Shareholders are recently learning the cost of companies pursuing political agendas. This includes sharp declines in stock prices of companies like Target and Anheuser-Busch InBev, which owns Bud Light, after those companies aligned their brands with controversial political and social issues. Unfortunately for the pensioners who invested in those companies, losses within their investment portfolios likely mean less money available for their retirement.
In addition to ESG issues, corporate resolutions have recently been introduced to examine companies’ exposure to China, amid recent initiatives, particularly among tech companies, to “decouple” from China because of strategic and human rights concerns. But while voting in favor of racial and climate audits, state pension funds have consistently voted against audits regarding China.

AAF reported that at Apple Inc.’s March 10 shareholder meeting, Florida’s SBA and OPERS, as well as Pennsylvania, North Carolina and California pension funds, voted against a proposal to report to shareholders “on the nature and extent to which corporate operations depend on, and are vulnerable to, Communist China, which is a serial human rights violator, a geopolitical threat, and an adversary to the United States.”

OPERS and Florida’s SBA voted against similar shareholder proposals at Intel, Goldman Sachs, McDonald’s, Merck and Starbucks, as in many cases did Pennsylvania and California pension managers.

"The ESG movement has consistently ignored the perils and risks of investing in China, including via passive investment products that funnel U.S. investment to Chinese companies connected to forced labor, companies aiding the authoritarian Chinese government's attacks on democracy, and companies helping to construct China's historic buildup of coal-fired power, to name a few," Nick Iacovella, senior vice president at the Coalition for a Prosperous America, told The Epoch Times. "If these supporters of the ESG movement really cared about what they preach, they would use the movement to end investment in China."

One thing all of these states have in common is that they have hired Glass Lewis as their proxy adviser, to counsel them on how to vote regarding shareholder proposals, and in some cases to vote on their behalf. Glass Lewis is one of the two largest proxy agents in the world; the other is Institutional Shareholder Services (ISS). Together, these firms control more than 90 percent of the proxy advisory market.
The AAF called Glass Lewis “one of the most engaged left-wing advocacy groups in the financial sector,” stating that an “in-depth examination of Glass Lewis personnel found them uniformly left-leaning from the C-Suite to junior research analysts.”

Glass Lewis responded to an Epoch Times request for comment by highlighting its corporate policy, which states that “Glass Lewis evaluates all environmental and social issues through the lens of long-term shareholder value. We believe that companies should be considering material environmental and social factors in all aspects of their operations and that companies should provide shareholders with disclosures that allow them to understand how these factors are being considered and how attendant risks are being mitigated.”

The Epoch Times reached out to Florida’s State Board of Administration to comment but did not receive a response by press time.

Kevin Stocklin is a business reporter, film producer and former Wall Street banker. He wrote and produced "We All Fall Down: The American Mortgage Crisis," a 2008 documentary on the collapse of the mortgage finance system. His most recent documentary is "The Shadow State," an investigation of the ESG industry.