Florida is moving $2 billion in taxpayer assets from accounts with BlackRock Inc. as the state’s Republican chief financial officer said big asset managers should focus on delivering returns rather than on promoting environmental, social and governance (ESG) principles.
In a statement that fits with the GOP’s post-midterm playbook of opposing so-called woke capitalism, Florida CFO Jimmy Patronis said late Thursday that the state’s treasury would freeze $1.43 billion in long-term securities held with BlackRock
and remove the firm as manager of $600 million in short-term overnight investments.
BlackRock reported $65 billion in long-term net inflows in the third quarter and had about $8 trillion in assets under management as of Sept. 30.
Shares of BlackRock fell 2.5%, outpacing financial stocks into the red on Friday. The Financial Select Sector SPDR ETF
dropped 1.2% in a day of losses on Wall Street after the November jobs report.
“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 in a statement. “It’s undemocratic of major asset mangers to use their power to influence societal outcomes.”
BlackRock said it was surprised by Florida’s move and that it agrees that fiduciaries should always value performance over politics, according to an email to MarketWatch.
“As a fiduciary, everything we do is with the sole goal of driving returns for our clients,” BlackRock said in the statement. “We are surprised by the Florida CFO’s decision given the strong returns BlackRock has delivered to Florida taxpayers over the last five years. Neither the CFO nor his staff have raised any performance concerns.”
Patronis said that if BlackRock CEO Larry Fink wants to change the world, he should run for office or start a nonprofit, but that using the state’s cash “to fund BlackRock’s social engineering project isn’t something Florida ever signed up for.”
In a rebuttal, BlackRock said it’s “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. “
BlackRock said it has invested more than $65 billion into Florida’s economy on behalf of its clients in the state.
The investment company also disclosed that U.S. clients awarded BlackRock $84 billion in long-term net inflows in the third quarter alone and $275 billion over the last 12 months.
In a column on the survivability of the approach, Morningstar wrote that ESG practices by fund managers have come under attack but said that despite the accusations, ESG and sustainable investing will continue.