HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/HB 3 Government and Corporate Activism
SPONSOR(S): State Affairs Committee, Commerce Committee, Rommel, Sirois, and others
TIED BILLS: IDEN./SIM. BILLS: SB 302
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Commerce Committee 16 Y, 5 N, As CS Lloyd Hamon
2) State Affairs Committee 13 Y, 6 N, As CS Villa Williamson
SUMMARY ANALYSIS
The Governor, Attorney General, and Chief Financial Officer – as trustees of the State Board of Administration
(SBA) – directed the SBA in August to invest funds of the Florida Retirement System Defined Benefit Plan in a
manner that prioritizes the highest return on investment, without consideration of social, political, or ideological
interests that have been the subject of debate among investors in recent years.
This bill expands the directive to cover all funds invested by state and local governments, including general
revenue, trusts dedicated to specific purposes, money held by retirement plans, and surplus funds. Investment
decisions, including written policies and the exercise of shareholder rights, must be driven solely by pecuniary
factors, and may not sacrifice investment return to promote non-pecuniary factors. The Attorney General is
authorized to bring civil or administrative actions to enforce provisions of the bill.
The term “pecuniary factor” is defined as a factor that is expected “to have a material effect on the risk or return
of an investment based on appropriate investment horizons consistent with applicable investment objectives
and funding policy. The term does not include the consideration of the furtherance of any social, political, or
ideological interests.”
Additionally, the bill prohibits both the state Division of Bond Finance and specified public bond issuers from
issuing an environmental, social, or corporate governance (ESG) bond, paying for the services of another to
verify or certify a public bond as an ESG bond, or contracting with rating agencies that use ESG scores in a
manner that directly impacts the issuer’s bond ratings.
For government contracting, the bill prohibits all units of state and local government from: 1) considering social,
political, or ideological beliefs when evaluating prospective vendors, or 2) giving any preference to a vendor
based on social, political, or ideological beliefs.
State and local governments may only deposit funds in banks and savings associations that have been
designated as a Qualified Public Depository (QPD). The bill prohibits certification as a QPD if a bank has
engaged in an “unsafe and unsound business practice” by denying or canceling services based on political
beliefs or affiliations, religious beliefs or affiliations, business sector, or any other factor that is not a
quantitative, impartial, risk-based standard, or applying social credit scores. QPDs will be required to certify
compliance with this requirement.
Other financial institutions – banks, trust companies, credit unions, consumer finance lenders, and money
services businesses – may be subject to administrative sanctions if they engage in an “unsafe and unsound
business practice” by denying or canceling services based on political beliefs or affiliations, religious beliefs or
affiliations, business sector, any other factor that is not a quantitative, impartial, risk-based standard, or
applying social credit scores.
The bill imposes indeterminate costs on state and local governments and on financial institutions operating in
Florida.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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 FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Investments
State Board of Administration
The State Board of Administration (SBA) was created by the Florida Constitution and serves as the state’s
independent investment management organization, with authority over 30 funds collectively valued at about
$228 billion as of June 30, 2022, including the state’s pension and investment plans for public employees,
which accounts for 79 percent of assets under management. 1 Other funds under management include the
Florida Hurricane Catastrophe Fund, Department of the Lottery Fund, Florida Prepaid College and Florida
College Investment Plan, FSU Research Foundation, Florida PRIME (surplus funds of local governments) and
the Police and Firefighters’ Premium Tax Trust Fund.2 The Governor, Chief Financial Officer, and Attorney
General serve as the SBA’s Board of Trustees (Trustees), and delegate operational authority to an executive
director and chief investment officer, who oversee about 200 employees. 3 A nine-member Investment Advisory
Council provides guidance on investment policy and strategy. 4
In August 2022, the Trustees directed the SBA to invest funds in a manner that prioritizes the highest return on
investment, without consideration of social, political, or ideological interests.5 A resolution adopted by the
Trustees directed the SBA to amend the Investment Policy Statement (IPS) for the Florida Retirement System
Defined Benefit Plan to require that investment decisions be based solely on pecuniary factors. 6 By law, the
IPS must clearly state its investment objectives, identify the types of securities the plan may invest in, and the
evaluation criteria that will be used to measure fund performance. 7 Investment managers who invest public
funds on behalf of the board certify compliance with the IPS annually.8 The resolution further states that the
Trustees, when exercising shareholder rights, including the voting of proxies, 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 non-pecuniary factors.9
In December 2021, the Trustees directed the SBA to reclaim proxy voting authority that had been given to
large financial firms and provide additional guidance to employees who are responsible for proxy voting and
investment decisions.10 During fiscal year 2021, SBA staff cast votes at 10,174 companies in 76 countries,
voting on ballot items including director elections, audit firm ratification, executive compensation plans,
1 Art. IV, s. 4(e) Fla. Const. (1968); State Board of Administration, Summary Overview of the State Board of Administration
of Florida, https://www.sbafla.com/fsb/Portals/FSB/Content/Topics/SBAOverview_20211025.pdf?ver=2021 -10-28-
120954-217 (last visited Feb. 13, 2023); State Board of Administration, Performance Report Month Ending June 30, 2022,
https://www.sbafla.com/fsb/Portals/FSB/Content/Trustees/2022/June%202022%20Monthly%20Trustee% 20Report.pdf?ve
r=2022-08-24-133206-397 (last visited Feb. 13, 2023).
2 A full list of SBA-managed investment funds is available at https://www.sbafla.com/fsb/FundsWeManage.aspx (last
visited (last visited Feb. 13, 2023).
3 S. 215.44, F.S.; Summary Overview of the State Board of Administration of Florida, supra footnote 1.
4 S. 215.444(2), F.S.
5 The State Board of Administration, A Resolution Directing an Update to the Investment Policy Statement and Proxy
Voting Policies for the Florida Retirement System Defined Benefit Plan, and Directing the Organization and Execution of
an Internal Review, Aug. 23, 2022, last visited (March 10, 2023).
6 Office of the Governor, Governor DeSantis Eliminates ESG Considerations from State Pension Investments (August 23,
2022) https://www.flgov.com/2022/08/ 23/governor-ron-desantis-eliminates-esg-considerations -from-state-pension-
investments/ (last visited Feb. 13, 2023).
7 S. 215.475, F.S.
8 S. 215.4755, F.S.
9 Officer of the Governor, Governor DeSantis Eliminates ESG Considerations from State Pension Investments, supra
footnote 5.
10 Office of the Governor, Governor Ron DeSantis Tak es Action Against Communist China and Wok e Corporations , Dec.
20, 2021, https://www.flgov.com/2021/ 12/20/governor-ron-desantis-takes -action-against-communist-china-and-woke-
corporations/ (last visited Feb. 13, 2023).
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mergers and acquisitions, and a variety of other management and shareowner proposals. 11 Of all votes cast,
17.5 percent were “against” the recommendation of company management. 12
State General Revenue and Trust Funds
The Chief Financial Officer (CFO) is responsible for the investment of state general revenue and trust funds. 13
Interest earnings are allocated to the general revenue fund, trust funds, and Special Purpose Investment
accounts.14 A five-member Treasury Investment Council provides guidance on investment policy and strategy. 15
Local Government Retirement Plans
The Department of Management Services (DMS) monitors and oversees 487 retirement plans of
municipalities, special districts, and school boards, to ensure they are actuarially sound.16 Local governments
must adopt a written investment policy that is structured to maximize the financial return on investments and
complies with the investment limitations that apply to funds managed by the SBA. 17 State law includes special
requirements for police and firefighter retirement plans; investments for these trust funds are managed by the
local board of trustees and are subject to similar investment policies applicable to state funds.18
Local Government Surplus Funds
There are several investment vehicles for surplus funds of local governments. 19
The SBA manages Florida PRIME (the Local Government Surplus Funds Trust Fund), which invests surplus
funds of 756 units of local government in accordance with the investment restrictions that apply to the
investment of state funds.20
Two other investment pools were created by interlocal agreements. 21 The Florida Association of Counties and
the Florida Court Clerks & Comptrollers created the Florida Local Government Investment Trust, which offers
public entities the choice of two professionally managed investment funds. 22 The cities of Bradenton,
Lauderhill, and Palatka created The Florida Municipal Investment Trust, which offers local governments the
choice of six fixed income portfolios, three equity portfolios, and a real estate portfolio.23
In general, investments of local government surplus funds are subject to the written investment plan adopted
by a governing board or principal officer of the local government entity. If there is no written investment policy,
the local government entity may only invest surplus public funds in Florida PRIME, an intergovernmental
11 State Board of Administration, 2022 Corporate Governance Summary Report, 2022 CG Annual Summary v4.pdf
(sbafla.com) (last visited Feb. 13, 2023).
12 Id.
13 S. 17.61, F.S. This includes funds of each state agency and of the judicial branch; and funds of all boards, associations,
and entities created by the Florida Constitution or by law.
14 Florida Department of Financial Services, Treasury Investment Pool,
https://www.myfloridacfo.com/division/treasury/treasury -investment-pool (last visited Feb. 13, 2023).
15 Id.
16 Florida Department of Management Services, Florida Local Government Retirement Systems 2022 Annual Report,
2022_Local_Report.pdf (fl.gov) (last visited Feb. 13, 2023).
17 S. 112.661, F.S.
18 Ss. 175.071 and 185.06, F.S.
19 S. 218.403(11), F.S., states: “ ‘Unit of local government’ means any governmental entity within the state not part of state
government and shall include, but not be limited to, the following and the officers thereof: any county, municipality, school
district, special district, clerk of the circuit court, sheriff, property appraiser, tax collector, supervisor of elections, authority,
board, public corporations, or any other political subdivision of the state.”
20 S. 218.405(16)(a), F.S. Also see, State Board of Administration, Florida PRIME Monthly Summary Report,
monthly_summary_report_01_31_23final.pdf (sbafla.com)(last visited March 10, 2023).
21 See ss. 163.01, F.S. and 218.415, F.S.
22 Florida Local Government Investment Trust, About, https://www.floridatrustonline.com/funds-reports/ (last visited Feb.
13, 2023).
23 Florida League of Cities, Florida Municipal Investment Trust,
https://www.floridaleagueofcities.com/services/investments -(fmivt) (last visited Feb. 13, 2023).
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investment pool, registered money market funds, interest bearing time deposits or savings accounts in
qualified public depositories designated by the CFO, or direct obligations of the U.S. Treasury.24
Citizen Support and Direct-support Organizations
Citizen support organizations (like Friends of Biscayne Bay or the North Florida Springs Alliance) and direct-
support organizations (like the University Athletic Association associated with the University of Florida) raise
funds to support causes that are in the public interest and often enter into a contract with a government entity
to define the terms of the organizations’ support to that government entity. Such organizations must submit
annual reports describing their activities to the appropriate government agency. Reports are forwarded to the
Governor, the Legislature, and the Office of Program Policy Analysis and Government Accountability by
August 15 each year.25
Effect of the Bill
The bill codifies and extends the policy adopted by the Trustees – requiring all investment decisions relating to
the state retirement system be based solely on pecuniary factors – to all funds managed by the SBA, all funds
of the state Treasury, all local government retirement plans, investments of local government surplus funds,
and investments of funds raised by citizen support and direct-support organizations.26 Investment managers
who invest public funds on behalf of any of these entities may not sacrifice investment return or take additional
investment risk to promote any non-pecuniary factor.
The bill also codifies and extends the policy adopted by the Trustees – requiring shareholder rights, including
the voting of proxies, to solely be exercised based on pecuniary factors – to all state and local pension plans.
Investment managers who exercise shareholder rights on behalf of state and local pension plans may not
sacrifice investment return or take additional investment risk to promote any non-pecuniary factor.
The term “pecuniary factor” is defined as a factor that is expected “to have a material effect on the risk or return
of an investment based on appropriate investment horizons consistent with applicable investment objectives
and funding policy. The term does not include the consideration of the furtherance of any social, political, or
ideological interests.” Further, the “weight given to any pecuniary factor must appropriately reflect a prudent
assessment of its impact on risk or returns.”
The bill requires the state and local retirement systems’ investment policy statements to comply with the bill’s
provisions.
State and local retirement systems must report compliance with the law on a biennial basis, beginning
December 15, 2023. Local government retirement plans must report to DMS; the SBA, on behalf of the Florida
Retirement System, must report to the Governor, Attorney General, CFO, and the Legislature. Reports must
describe governance policies and standards for the exercise of shareholder rights. After receiving the local
reports, DMS must submit a summary report that identifies any relevant trends to the Governor, Attorney
General, CFO, and the Legislature, on a biennial basis beginning January 15, 2024. In addition, DMS is
directed to report incidents of noncompliance to the Attorney General, who may seek an injunction against any
agency violating the investment, proxy voting, or reporting provisions and recover attorney fees and costs
when an enforcement action is successful.
The bill specifies that the above provisions do not apply to individual member-directed investment accounts
established as part of a defined contribution plan under s. 401(a), s. 403(b), or s. 457 of the Internal Revenue
Code.
24 S. 218.415(16), F.S.
25 S. 20.058, F.S.
26 The bill requires citizen support organizations and direct-support organizations to submit to the appropriate agency an
attestation, under penalty of perjury, stating that the organization has complied with the bill’s investment standards.
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The bill requires any contract between a governmental entity27 and an investment manager28 executed,
amended, or renewed on or after July 1, 2023, to contain a provision requiring the investment manager to
include a disclaimer in an external communication, if the communication is to a company in which the
investment manager has invested public funds 29 and discusses social, political, or ideological interests;
subordinates the interests of the company’s shareholders to the interests of another entity; or advocates for an
entity other than the company’s shareholders. This applies to the investment of general revenue, surplus
funds, trust funds, and retirement plans.
The required disclaimer must state: “The views and opinions expressed in this communication are those of the
sender and do not reflect the views and opinions of the people of the state of Florida.”
All contracts with investment managers executed, amended, or renewed on or after July 1, 2023, may be
unilaterally terminated if certain communications of an investment manager include discussion of social,
political, or ideological interests and omit the required disclaimer described above.
Additionally, investment managers, who are required to certify compliance with the fiduciary standards set forth
in the state’s investment policy annually, are required to certify that all investment decisions made on behalf of
the state are based solely on pecuniary factors. In addition, such investment managers are subject to
sanctions if they fail to timely file the required certification or submit a certific