The Florida Division of Bond Finance published a notice (the Notice) on June 29, 2023, providing guidance on Florida House Bill Three (HB 3), which was signed into law on May 2, 2023, by Gov. Ron DeSantis. HB 3, in part, restricts the use of environmental, social and corporate governance (ESG) factors in connection with municipal debt issuances within the state of Florida. For a more general look at HB 3, see Holland & Knight's alert, "New Florida Law Prohibits Use of ESG Factors in Government Investment and Procurement Decisions," June 30, 2023.

Florida's Prohibitions Against ESG

Pursuant to HB 3, issuers are prohibited from contracting with "any rating agency whose ESG scores for such issuer will have a direct, negative impact on the issuer's bond rating." The Notice clarifies that "current rating agency criteria indicates ESG scores are an output of a general credit analysis and do not independently influence the credit rating of issuers." According to the Notice, HB 3 "institutes taxpayer protections against government issuers contracting with rating agencies that attempt to transition to a paradigm that maps ESG scores directly to an issuer's credit rating." The Notice further provides that HB 3 does not prevent rating agencies from analyzing and discussing "credit risks they believe are relevant, such as providing feedback on potential risks from natural disasters, such as hurricanes, or other risks that are relevant or may potentially be relevant to an issuer's...

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