Bloomberg: Guess Who Loses After Governments Bar ESG Banks?

As we have been posting in the last days, United States seems divided when you refer to ESG.

Last Monday it was Ron DeSantis, Governor of Florida, that went on Twitter and posted: "ESG is a threat to the American economy and the individual freedoms that our country is built upon. It is dead on arrival in Florida."

At the same day, an interesting article by Bloomberg: "Guess Who Loses After Florida and Texas Bar ESG Banks?". The answer is "a hidden tax foisted on their residents amounting to hundreds of millions of additional dollars."

Private sector - together with future generations - seems commited to ESG in favor protection of natural resources, human rights, health and safety, community engagement, transparency, compliance with regulatory policies, diversity, equity and inclusion. And investors like this potential. See recent example of Morgan Stanley. And private sector leaders like Larry Fink, chief executive officer of BlackRock Inc. promoted that ESG is “capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers and communities your company relies on to prosper.”

On the other hand, parts of the public sector, decry ESG as “woke".

Since it began its assault on ESG in 2022, Texas, with its perfect AAA credit rating, is paying 19 basis points more in yield (the equivalent of $1.9 million on every $1 billion of bonds sold) than AA rated California on routine borrowings, according to data compiled by Bloomberg.

And for all his venom toward ESG, DeSantis is poisoning the market for AAA rated Florida debt. Shorn of the liquidity that comes from a robust group of underwriters, Florida now pays 43 basis points more in yield (or $4.3 million for every $1 billion of bonds sold) than California with an inferior credit rating. Or 0.35% more than it did prior to 2022. The Florida deterioration is a record, according to data compiled by Bloomberg. Sooner or later, the bill arrives.

Click at the image below for this interesting article and analysis by Bloomberg.