Back in 2015, when California was the seventh-largest economy in the world, ahead of the rest of the U.S., economist Irena Asmundson linked her home state’s trajectory to a government increasingly in tune with its diverse constituents. The cost of clean energy will “continue to fall” because of the convergence of “public policy and people’s preferences,” she said, amid the spread of solar rooftops and zero-emission electric cars from Balboa Park to Yosemite Valley. “Everyone can see the writing on the wall that climate change is happening. In the future, these clean technologies will be more valued.”

That’s especially true for businesses in the Golden State, whose gross domestic product may overtake Germany’s and where the 30 publicly traded companies that derive more than half of their revenue from alternative energy are mostly based in California. These companies have collectively returned 1,600% over the past 10 years, exponentially surpassing the 46% return plus appreciation of the world’s 58 traditional fossil fuel companies as the cost of solar has fallen 80%, according to data compiled by Bloomberg. According to Jenny Chase, solar analyst at BloombergNEF, solar energy is now the cheapest source of mass-produced electricity in most solar countries on a per MWh basis.

California’s innovation and prosperity are the result of stakeholder-oriented environmental, social and governance (ESG) policies that promote sustainable development according to Adam Smith’s invisible hand of a free market economy. Larry Fink, chairman, chief executive officer and co-founder of BlackRock Inc., whose $10 trillion in assets make it the largest money manager, said as much when he told shareholders that ESG is “capitalism driven by mutually beneficial relationships between you and your employees , customers, suppliers and communities your company relies on to thrive.”

Not so in Texas and Florida, where recent and proposed laws related to the environment, education, guns and social behavior are defying most citizens who support civil and reproductive rights and want to prevent mass shootings. According to U.S. Census data, the rate of gun deaths per 100,000 people in Texas, which like Florida gives most adults the easiest access to firearms, including military automatic weapons, is about 67% higher than in California. Florida scores just as badly as California, which has more gun laws than any other state, because ESG is overwhelmingly supported by its population of 39 million.

In Florida and Texas, and a half-dozen other states where gun deaths, abortion bans and opposition to clean energy are rife, ESG and Fink are the alleged boogeymen being disingenuously attacked by Gov. Ron DeSantis, who is projected to enter the 2024 presidential race as soon as today – and Greg Abbott, and whose rigged legislatures are reducing black voter representation and banning companies like BlackRock from managing public pension funds or guaranteeing their debt obligations.

Jimmy Patronis, who as chief financial officer is responsible for Florida’s $36 billion pension fund, said he would ban Bank of America Corp. and Wells Fargo & Co., the No. 2 and No. 3 U.S. banks, because they have emissions targets and avoid doing business with firearms manufacturers. The state is now criminalizing school librarians for keeping banned books in circulation and suing the Walt Disney Co., whose Walt Disney World theme park complex in Orlando is the largest single-site employer in the U.S., because DeSantis was outraged when the company publicly quit challenge state laws that undermine diversity, equity and inclusion. Disney will no longer move forward with a plan to move California employees to a new $864 million corporate campus in Florida, stripping DeSantis and the state of about 2,000 high-paying jobs and all the economic and tax benefits that come with them.

The Republican-controlled Texas Legislature stunned many of the state’s biggest boosters when it introduced bills that encourage fossil fuel use and discourage renewable energy development, even though Texas is the nation’s No. 1 wind power producer and has the resources to overtake California on solar installations. It’s a “radical departure,” said Locke Lord, a national energy law firm, for a state that “has long prided itself on a business-friendly regulatory climate that encourages, not stifles, economic development,” Michael wrote. Weber, a professor of energy resources at the University of Texas, in an op-ed for the New York Times earlier this month.Webber is also the chief technology officer of venture capital fund Energy Impact Partners, a global investment firm that specializes in technologies that help decarbonize the global economy.

The attack on ESG is a losing proposition for Florida and Texas, as evidenced by increased borrowing costs for taxpayers as big banks and other companies were shut out of doing business with the states and their local governments last year. Texas, which has a AAA rating, pays about 20 basis points more in interest on its general obligation bonds than California, which has a lower AA- rating from S&P Global. Financing costs in the two largest states were equivalent in 2022. Florida, also rated AAA, is paying a record 44 basis points more than California, according to the data compiled, an unprecedented setback for the top-rated borrower in the $4 trillion municipal bond market. according to Bloomberg.

Unlike California, Texas and Florida have no income tax, so their bonds historically have relatively fewer buyers than issuers with bonds exempt from federal, state and local taxes. Nevertheless, the sudden decline in the relative value of Florida and Texas bonds reflects a backlash in the market amid the states’ policies against companies that consider ESG in their investment criteria. California bonds, by contrast, rose 4.7% over the past 12 months, beating Texas by 1.2 percentage points and Florida by 0.9 percentage points, according to data compiled by Bloomberg.

Home to 12% of the US population and 14.8% of US GDP, California continues to lead the nation in the stock market. Companies that reside there, as well as members of the Russell 3000 index, have appreciated 35% this year, as corporate America’s overall return has been 8%, data compiled by Bloomberg show. Companies in Texas and Florida trailed by 7% and 6%. According to analyst estimates compiled by Bloomberg, corporate California will continue to outperform with average earnings growth of 20% in 2023, or nearly double the U.S. average (11%) and more than double the 9% in Florida and Texas 7%. California also remains a top corporate employer, adding 26% to its payroll over the past three years, while similar employment in Texas and Florida grew by 8% and 5%.

On the clean energy side, between 2023 and 2030, more than 600 gigawatts of new solar, wind and storage will come online in the U.S., and California will have the largest share of clean energy capacity, according to BloombergNEF. At the same time, California Independent System Operator real-time prices are falling to negative record rates due to rising renewable energy production in the region.

All this proves that the convergence of government policy and citizens’ preferences creates a reliable path to growth. More from Bloomberg Opinion:

• GOP states race toward authoritarianism: Frances Wilkinson

• DeSantis’ fight with Disney won’t help him beat Trump: Joshua Green

• Crash Course: Florida Vs. Young Minds: Timothy L. O’Brien

–With the help of Shin Pei.

This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.

Matthew A. Winkler, editor-in-chief emeritus of Bloomberg News, writes about the markets.

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