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By Sharon Kimathi, Energy and ESG Editor, Reuters Digital

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After months of build-up, Florida governor Ron DeSantis has signed into law a bill barring state officials from investing public money to promote environmental, social and governance (ESG) goals. Scroll on for how DeSantis’ anti-ESG rhetoric targets climate change and diversity initiatives. And find out how sheep at an energy farm in Kosovo have helped workers deal with mowing grass in today’s ESG Spotlight.

The bill is one of the farthest-reaching efforts yet by the U.S. Republicans against sustainable investing efforts, and a clear political message from DeSantis, a likely presidential candidate.

Analysts said the legislation goes further than other state anti-ESG bills, even as business groups worry the efforts pose financial risks.

The law also outlaws the sale of ESG bonds, a popular way to fund renewable energy projects or lower debt costs for borrowers if they meet gender diversity or greenhouse gas emissions targets.

Florida Governor Ron DeSantis delivers a speech at The Heritage Foundation’s 50th anniversary in National Harbor, M.D., U.S., April 21, 2023. REUTERS/Sarah Silbiger/File Photo

The Biden administration said it will defend funding for climate-smart farming in the $430 billion U.S. Inflation Reduction Act (IRA) if Republican lawmakers seek to cut it during negotiations for the next farm bill, an official said.

As negotiations begin over the next farm bill, which funds farm commodity, conservation, and nutrition programs, some Republicans have raised concerns about how the IRA funds would be spent and floated reallocating some of the money.

Republicans, including some from energy-producing states, say many executives and investors have lost their focus on returns as they take growing account of issues like climate change and workforce diversity.

But studies show that workforce diversity is a net positive for companies. A report by global management consulting firm McKinsey shows that “the most diverse companies are now more likely than ever to outperform less diverse peers on profitability”.

“Companies with more than 30 percent women executives were more likely to outperform companies where this percentage ranged from 10 to 30, and in turn these companies were more likely to outperform those with even fewer women executives, or none at all,” the report said.

The report also finds that the “likelihood of outperformance continues to be higher for diversity in ethnicity than for gender” with top-quartile companies outperforming those in the fourth one by 36 percent in profitability in 2019.

But it’s not just Florida’s governor seeking to roll-back diversity efforts this week in the United States. Employers will need to contemplate how the U.S. Supreme Court’s decisions addressing affirmative action in college admissions programs may impact their diversity, equity, and inclusion (DEI) initiatives and ESG commitments.

The case, Students for Fair Admissions, Inc. v. University of North Carolina, Students for Fair Admissions, Inc. v. President & Fellows of Harvard College, could also have implications for race-conscious charitable programs sponsored by companies and nonprofit foundations and race-conscious contracts with third-party contractors.

People walk inside Barclays Bank’s headquarters in the financial district of Canary Wharf, east London, July 3, 2012. REUTERS/Andrew Winning

James Parker, founding sustainability lead at UK-based emissions data platform Minimum, shares his thoughts about the ESG debate:

“We’re in the midst of a big paradigm shift right now, so it’s unsurprising the fault lines of the ESG debate are still in flux. But that’s changing very quickly and the writing is on the wall.

“There are around $20 trillion in ESG assets under management today and that number is only set to increase.

“Last year, PwC observed that 60% of institutional investors reported higher performance yields from ESG-assets than non-ESG equivalents. Whatever people may think of them, sustainability metrics are here to stay. 

“Critics of ESG talk of prohibitive compliance costs, regulatory overreach and – most importantly — the data problem. 

“But these arguments have lost credence in recent years. The technology has evolved and it’s now possible to reliably track emissions all the way through the value chain across scopes 1, 2 and 3. 

“We’re seeing more and more shareholder activism around this issue — even when it goes against board recommendations. 

“And while the EU currently remains more exacting than the United States from a regulatory standpoint, we’re also seeing a convergence around methodologies and agreed terminology in the interests of businesses operating internationally. That’s a good thing — the sooner everyone is reading from the same playbook, the better.”

Median pay for top U.S. CEOs rose 7.7% last year to a record $22.3 million, a new study found, as big stock awards helped the group stay ahead of inflation while U.S. workers’ pay fell behind.

The study reviewed the 100 highest paid CEOs at U.S. public companies with revenue of $1 billion or more that reported compensation as of March 31. A similar review last year showed a 31% pay increase for CEOs for 2021.

Sheep graze between the solar panels of a solar park in Rogane, Kosovo, May 1, 2023. REUTERS/Fatos Bytyci

From nature’s very own mowing machine in Kosovo to an Israeli footech company 3D printing fish filet in today’s ESG Spotlight.

When workers at a solar energy farm in Kosovo got tired of wasting their own energy cutting the grass around their solar panels, they turned to a greener and much more powerful mowing machine: a flock of sheep.

More than 100 sheep and a few goats graze twice a week at the Rogane solar farm near the small town of Kamenica in eastern Kosovo where more than 12,000 photovoltaic panels are installed.

“The workers realized that mowing the fields was very hard, they asked me whether I could bring my sheep,” said 72-year-old shepherd Rexhep Rrudhani as he ordered his sheepdogs to maneuver the flock grazing under the panels. “The sheep eat all kinds of grass here, good or bad grass, and they clean everything. We are all benefiting.”

A chef holds up pieces of 3D-printed cultivated grouper fish before making them into a dish for a tasting at Steakholder Foods in Rehovot, Israel, April 23, 2023. REUTERS/Amir Cohen

Forget your hook, line and sinker. An Israeli foodtech company says it has 3D printed the first ever ready-to-cook fish filet using animal cells cultivated and grown in a laboratory.

Lab-grown beef and chicken have drawn attention as a way to sidestep the environmental toll of farming and tackle concerns over animal welfare, but few companies have forayed into seafood. Israel’s Steakholder Foods has now partnered with Singapore-based Umami Meats to make fish filets without the need to stalk dwindling fish populations.

“The backlash picked on the impetus behind ESG not being just financial. I want the world to be a better place and I want to implement a 1.5°C world and there’s some cognitive dissonance between that and company-by-company profit and improvement. The ESG backlash capitalizes on that cognitive dissonance.”

Rick Alexander, CEO of the Shareholder Commons, a U.S.-based NGO

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