On Thursday, the Chief Financial Officer of Florida, announced his department was puling $2 billion worth of assets out of management by BlackRock Inc. due to the fund’s promotion of Environmental, Social, and Corporate Governance investment strategies. It is the biggest such divestment by a state so far.
Despite the fact the move will hardly affect BlackRock due to the $8 trillion in assets it holds under management, the company issued a strong response, decrying the move as one which put politics over investor interests.
The move is being seen as indicative of the growing backlash against socially responsible investing by Republican leaders in Florida and elsewhere. The feel such a focus on matters other than profit and growing investor assets is a breach of the fiduciary duties of the investment funds. They argue investment funds, especially those overseeing retirement accounts, should pay little mind to issues like climate change or workforce diversity, and focus simply on returns and investment security.
It is expected when Republicans take control of Congress in January of the new year, they will hold investigatory hearings into the ESG movement and question company executives on policies, as they seek increased regulatory scrutiny of the sector.
Florida CFO Jimmy Patronis made the announcement that the state’s Treasury would be removing BlackRock as a manager of roughly $600 million in short-term investments, and they would have its custodian put a freeze on roughly $1.43 billion in long-term securities currently held by BlackRock, while they look to relocate those funds with other money managers by the beginning of the new year.
Patronis noted, in pursing an ESG strategy, BlackRock was failing to focus on its responsibility of securing higher investment returns for its clients.
In the statement, he said, “Florida’s Treasury Division is divesting from BlackRock because they have openly stated they’ve got other goals than producing returns.”
In response, BlackRock said in a statement, “We are disturbed by the emerging trend of political initiatives like this that sacrifice access to high-quality investments and thereby jeopardize returns, which will ultimately hurt Florida’s citizens. Fiduciaries should always value performance over politics.”
BlackRock noted it had invested more than $65 billion in Florida based companies, municipal bonds, and other securities, and Patronis had not pointed to any specific performance failures in its funds management.
BlackRock also noted that although it asks companies to disclose such things as data regarding carbon emissions, or workforce diversity, it does so in the hopes of improving performance. It also noted it has resisted calls to divest from such profitable sectors as the fossil fuel sector, merely for environmental reasons.
So far it has only been the leaders of Republican-controlled states which have reallocated funds out of BlackRock, which included a $794 million reallocation by Louisiana’s Treasurer and a $500 million reallocation by Missouri’s Treasurer, both in October.
Republican Attorneys General from a number of states earlier in the week petitioned a federal regulator to limit the Vanguard Group Inc’s activities due to concerns over their ESG investment policies.
