On Thursday, Florida’s chief financial officer announced that the department would be withdrawing $2 billion worth of assets managed by BlackRock Inc (BLK.N). This is the biggest divestment by a state opposed to BlackRock’s environmental, social and corporate governance (ESG) policies.
BlackRock’s $8 trillion in assets will hardly be affected by the move, and the company responded strongly, saying that investor interests were being put behind politics.
Even though this event happened, it does show how more and more people are against ESG investing. This is especially true for Republican leaders in Florida who think that companies should not focus on things like climate change or workforce diversity.
In January, the Republicans will take over the U.S. House of Representatives, giving them influence over ESG policies and company executives through hearings, as well as putting pressure on regulators.
BlackRock, who manages short-term investments worth $600 million as well as long-term securities totaling $1.43 billion, will have its custodian freeze the latter with the goal of reallocating the funds to different money managers by 2023 according to a statement from Florida CFO Jimmy Patronis.
Patronis said that BlackRock’s focus on ESG is causing investors to miss out on higher returns.
“Florida’s Treasury Division is divesting from BlackRock because they have openly stated they’ve got other goals than producing returns,” Patronis said, in a statement provided by his office.
Regarding the move, 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 stated that neither Patronis nor his office had brought up any performance concerns, adding that it has invested more than $65 billion in Florida-based companies, municipal bonds and other securities.
Although BlackRock has pushed portfolio companies to take measures such as revealing more data about their carbon footprints and appointing diverse board members, it has stated that its goal is to enhance company performance. It has furthermore dismissed requests for action like selling stocks in oil corporations.
U.S Democratic officials have argued that BlackRock does not press ESG concerns enough. So far, only Republican-controlled states have made major reallocations away from BlackRock, including $794 million pulled by Louisiana’s treasurer and $500 million by Missouri’s treasurer in October.
Many other companies are also under Republican scrutiny.
This week, attorneys general from multiple Republican states requested that a federal regulator place limitations on Vanguard Group Inc’s activities due to ESG concerns. They also asked United Parcel Service Inc (UPS.N) and FedEx Corp (FDX.N) to specifying their policies regarding shipment of firearms.
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