Florida divests $2 billion from BlackRock for largest anti-ESG divestment

DEC 1 (Reuters) – Florida’s chief financial officer said on Thursday his department would divest its $2 billion in assets under management from BlackRock Inc (BLK.N), the largest such disposal by a state that violated the The asset manager’s environmental, social and corporate policies are governance (ESG) guidelines.

The move will hardly affect BlackRock’s $8 trillion fortune and drew a strong reaction from the company, which said the move put politics ahead of investor interests.

Nonetheless, it underscores how a backlash against ESG investing is gaining momentum among Republican leaders in Florida and elsewhere, who criticize companies for focusing on issues like climate change or workforce diversity.

Republicans are scheduled to take control of the US House of Representatives in January. This allows them to hold hearings on ESG, quiz company executives about their policies and pressure regulators to scrutinize them.

In a statement, Florida chief financial officer Jimmy Patronis said the state’s Treasury Department, which he oversees, is removing BlackRock as the manager of about $600 million in short-term investments and its custodian is now holding BlackRock’s long-term securities for 1.43 billions of US dollars would freeze the funds to other wealth managers until early 2023.

Patronis accused BlackRock of focusing on ESG rather than higher returns for investors.

“Florida’s Treasury Division is divesting from BlackRock because they have openly stated that they have other goals than generating returns,” Patronis said in his office’s statement.

Asked about the move, BlackRock said in a statement, “We are concerned by the emerging trend of policy initiatives like this one that sacrifice access to quality investments, thereby jeopardizing returns that will ultimately harm Florida citizens.” Trustees should always value performance more highly than policy.”

Neither Patronis nor his office have raised any performance concerns, BlackRock said, adding that the company has invested more than $65 billion in Florida-based companies, municipal bonds and other securities.

While BlackRock has encouraged portfolio companies to take steps such as disclosing more data on their carbon emissions or adding more diverse board members, it has said its efforts are aimed at improving company performance and has met calls for steps such as exiting Oil company opposed.

US Democrats have argued that BlackRock does not express enough ESG concerns. Continue reading

So far, only Republican-controlled states have made major reallocations from BlackRock, including $794 million withdrawn from the Louisiana Treasurer and $500 million from the Missouri Treasurer, both in October. Continue reading

Other companies are also under scrutiny from Republicans.

Earlier this week, Republican Attorneys General from various states requested a federal regulator to restrict Vanguard Group Inc’s activities related to ESG concerns and urged United Parcel Service Inc (UPS.N) and FedEx Corp (FDX.N) to amend their policies to track firearms to clear shipments.

reporting by Ross Kerber; Edited by Chizu Nomiyama

Our standards: The Thomson Reuters Trust Principles.

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