Florida’s chief financial officer said the state will divest some $2 billion from BlackRock, the largest such state divestment from the money manager yet over its stance on environmental and social goals.
Florida CFO Jimmy Patronis announced the move on Thursday, noting that the state Treasury will make Florida’s custody bank freeze some $1.43 billion worth of long-term securities and remove BlackRock as the manager of about $600 million worth of short-term overnight investments.
The move comes as other GOP-led states have divested from BlackRock, which is the world’s largest money manager.
“As major banking institutions and economists predict a recession in the coming year, and as the Fed increases interest rates to combat the inflation crisis, I need partners within the financial services industry who are as committed to the bottom line as we are — and I don’t trust BlackRock’s ability to deliver,” Patronis said in a statement.
REPUBLICANS AIM TO TURN ESG INTO 2024 LIABILITY FOR DEMOCRATS
The announcement from Patronis came as a surprise to BlackRock, according to a statement provided to the Washington Examiner.
“Neither the CFO nor his staff have raised any performance concerns. 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,” the statement read. “BlackRock is proud to have invested more than $65 billion into Florida’s economy on behalf of our clients. We also look forward to continuing to invest in and serve our clients in Florida.”
While proponents of environmental, social, and corporate governance, or ESG, goals in finance see it as a way that finance and business can effect social change — for example, mitigating the deleterious effects of climate change — Republicans see the drive as an attempt to distort the free market and even the culture of the United States through capital and influence.
BlackRock has become a punching bag of sorts for GOP officials who are pushing back against the growing ESG movement, which they claim runs counter to the key value in investing — getting the best returns possible.
BlackRock CEO Larry Fink has been targeted for pushing for the corporate embrace of stakeholder capitalism, which bucks the notion that the sole purpose of a corporation is to serve its shareholders and rather focuses value also on customers, employees, suppliers, and communities. His company’s dalliances with China have also faced blowback.
“Whether stakeholder capitalism, or ESG standards, are being pushed by BlackRock for ideological reasons, or to develop social credit ratings, the effect is to avoid dealing with the messiness of democracy,” Patronis said. “I think it’s undemocratic of major asset managers to use their power to influence societal outcomes. If Larry, or his friends on Wall Street, want to change the world — run for office. Start a nonprofit. Donate to the causes you care about.”
Florida’s divestment comes after Missouri announced in October it was pulling some $500 million in pension funds from BlackRock. Louisiana, Utah, South Carolina, and Arkansas are among other red states that have slashed ties with Fink and BlackRock.
State officials have taken other actions against ESG as well as it gears up to be a topic that will be discussed on the 2024 campaign trail for Republicans. West Virginia Treasurer Riley Moore recently announced a run for Congress and told the Washington Examiner that it will be an issue he is going to campaign on and work to tackle should he be elected.
“Certainly, there have been individuals and elected officials on the Hill that have talked about ESG, but I think there is not a total comprehensive understanding of how pervasive this is, how dangerous it is, and steps that need to be taken to kind of fill in some of the cracks here where the states obviously cannot,” Moore said.
Amid the barrage of divestments and public scrutiny, BlackRock launched a webpage committed to “setting the record straight” about how it handles investment decisions, disclosure, and ESG. The firm claims its views on climate risk aren’t unique, and its new webpage noted that an overwhelming majority of companies in the S&P 500 publish sustainability reports.
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“The energy industry plays a crucial role in the economy, and, on behalf of our clients, BlackRock has invested $170 billion in U.S. public energy companies,” the webpage reads. “We are also partnering with energy companies and start-ups to fund new technology and innovations that will power the global economy, now and in the future.”
