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Arizona is moving forward with a plan to divest its pension funds from BlackRock, prompting other states to take similar action amid concerns about the big investment firm’s push for environmental, social and governance (ESG) policies.
Arizona Treasurer Kimberly Yee said in a statement Thursday that the state treasury’s Investment Risk Management Committee (IRMC) will begin evaluating the relationship between the state’s pension fund and BlackRock in late 2021.
“Part of IRMC’s investigation involved reading annual letters from CEO Larry Fink, who in recent years began dictating to businesses across the US to follow his personal political beliefs,” Yee said. “In short, BlackRock moved from a traditional asset manager to a political action committee. Our internal investment team believed that this removed the firm from its fiduciary role as an asset manager in general.”
ESG FALLOUT: BLACKROCK CEO LARRY FINK SHOULD RESIGN, SAYS STATE TREASURER
BlackRock offices in New York. The company, along with nine others, has been named by Texas Comptroller Glenn Hegar as hostile to the state’s fossil fuel sector. (LightRocket via Eric McGregor/Getty Images/Getty Images)
In response to those findings, Yee noted that Arizona began divesting more than $543 million from BlackRock money market funds in February 2022, “reducing our direct exposure to BlackRock by 97%” during the year. Yee added that Arizona “will continue to reduce our remaining exposure to BlackRock over time in a phased approach that considers a safe and prudent investment strategy that protects taxpayers.”
While the state will continue to hold some BlackRock stock through shares in a passive index of the top 1,500 American corporations, Arizona will have “minimal direct exposure” to BlackRock and “less than 1 percent of our total assets under management.” until the end of November. Yee said Arizona intends to vote its shares in the index to “change BlackRock’s political activism.”
Yee’s statement concluded: “We will fight back against the dangerous path of companies pushing their social issues and awakenings in the investment space, and return to traditional money management that puts people first.”
BLACKROCK’S ESG PUSH PUTS CEO LARRY FINK IN ACTIVE CROSSHEARS
BlackRock Chairman and CEO Larry Fink arrives at the DealBook Summit on November 30, 2022 in New York City. (Reuters/David ‘Dee’ Delgado)
BlackRock is currently the world’s largest asset manager with approximately US$8 trillion under management and is one of the few major financial institutions responsible for adopting ESG standards in recent years. The ESG movement works broadly promote a green energy transition and left social priorities through the financial sector. Critics of the ESG movement argue that its focus on green investing conflicts with firms’ fiduciary responsibility to achieve the best possible return for investors.
BlackRock hit back at criticism of its investment strategy in a statement to Fox Business: “Over the past year, BlackRock has been subject to campaigns suggesting that we are either ‘too progressive’ or ‘too conservative’ in the way we manage our clients’ money. So have we.” we are not. We are fiduciaries. We put our clients’ interests first and provide the investment options and performance they need. We will not let these campaigns stop us from delivering to our clients.”
The statement added: “Clients in the US alone contributed $84 billion in long-term net inflows to BlackRock in the third quarter and $275 billion in premiums over the past twelve months.”
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BlackRock Inc. CEO Larry Fink speaks during an interview with Bloomberg Television on Wednesday, April 19, 2017, in New York, U.S. (Christopher Goodney/Bloomberg via Getty/Getty Images)
BlackRock’s ESG policies have drawn the ire of some investors and government politicians.
Florida’s chief financial officer recently announced that the state treasury is taking action Write off nearly $2 billion in assets From the management of BlackRock until the end of this year. in October, Louisiana and Missouri BlackRock, which has about $1.3 billion in combined assets, has announced it will redistribute public pension funds. Along with Arizona’s divestment, roughly $3.8 billion in public pension funds have been pulled from BlackRock by those four states alone.
In addition, the state treasurer of North Carolina demanded the resignation of BlackRock CEO Larry Fink, and the Texas legislature subpoenaed BlackRock for financial documents.
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The investment firm has also taken heat from activists who argue that BlackRock is not doing enough to meet its ESG obligations. New York City Comptroller Brad Lander wrote to Fink in September, citing a “disturbing” discrepancy between the company’s words and actions. Lander wrote: “BlackRock cannot simultaneously declare that climate risk is a systemic financial risk and claim that BlackRock has no role in mitigating the risks that climate change poses to its investments by supporting decarbonization in the real economy.”
BlackRock insists that its “role in the transition is as a fiduciary to our clients” and is “not to design the concrete outcome of decarbonisation in the real economy, but to help them manage investment risks and opportunities”.
Fox Business’ Breck Dumas contributed to this story.