Republican-Led States Pull Over $1 Billion From BlackRock, Cite Concerns Over ESG Strategies

A sign for BlackRock Inc. hangs above the company's building in New York City, on July 16, 2018. Lucas Jackson/Reuters

A string of Republican states have announced they are pulling out their investments in the world’s largest asset manager, BlackRock, due to concerns over the company’s move to embrace environmental, social, and governance (ESG) investment strategies.

In an interview with the Financial Times, Curtis Loftis, South Carolina’s state treasurer, said he would pull $200 million from BlackRock by the end of the year.

Meanwhile, Louisiana’s treasurer, John Schroder, informed the company last week that the state would be withdrawing $794 million in investments in the corporation, citing its promotion of “blatantly anti-fossil fuel policies” that would “destroy Louisiana’s economy.”

“Therefore, the Louisiana Treasury will liquidate all BlackRock investments by the end of 2022. To date, we have divested $560 million. We are strategically divesting over a period of time so state money is not lost to the detriment of our citizens,” Schroder wrote (pdf), on Oct. 5, to Laurence Fink, CEO of BlackRock.

“Once complete, this divestment will reflect $794 million no longer entangled in BlackRock money market funds, mutual funds, or exchange-traded funds (ETFs) holdings.”

The trading symbol for BlackRock is displayed at the closing bell of the Dow Jones Industrial Average at the New York Stock Exchange in New York City, on July 14, 2017. Bryan R. Smith/AFP via Getty Images

Republicans Issue Demands

Utah’s treasurer, Marlo Oaks, announced in September that he has liquidated $100 million in BlackRock funds and moved those funds to different asset managers, while Arkansas’s state treasurer, Dennis Milligan, reportedly pulled $125 million in March.

New York-based BlackRock, which manages $10 trillion in assets, is one of the most powerful entities in the world.

The company also owns large stakes in a substantial number of companies in the United States and worldwide, including Apple, Microsoft, and Amazon, and, given its huge stakes, consequently holds great influence in determining the policies of those companies.

However, the asset manager has increasingly come under fire from Republican lawmakers who have accused it of placing its political agenda above the interests and profits of clients.

In September, 19 state attorneys general from Republican-leaning states sent a letter (pdf) to BlackRock CEO Larry Fink challenging his company’s “reliance on environmental, social, and governance investment criteria rather than shareholder profits in managing state pension funds.”

ESG investing is a set of standards used by a company in the investment decision-making process to measure sustainable and ethical impacts.

“BlackRock’s past public commitments indicate that it has used citizens’ assets to pressure companies to comply with international agreements, such as the Paris Agreement, that force the phase-out of fossil fuels, increase energy prices, drive inflation, and weaken the national security of the United States,” the attorneys general wrote in their letter.

Larry Fink, chief executive officer of BlackRock, takes part in the Yahoo Finance All Markets Summit in New York City, on Feb. 8, 2017. Reuters/Lucas Jackson/File Photo

BlackRock Issues Rebuttal

Last week, the investment company published a new page on its official website titled, “Energy Investing: Setting the Record Straight,” in which it states that “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,” including pipelines and power-generation facilities.

“Despite these investments, BlackRock has recently been accused of ‘boycotting’ oil and gas companies. We’re setting the record straight about our focus on energy investing, our responsibilities to clients, and how we consider climate risk,” the page reads.

The company noted that its priority is “fulfilling our commitment to our clients’ financial interests” and that it does not “dictate how clients should invest,” but that it believes that “companies that better manage their exposure to climate risk and capitalize on opportunities will generate better long-term financial outcomes.”

“We have not made commitments or pledges to meet environmental standards that constrain our ability to invest our clients’ money on their behalf consistent with their objectives,” the company added.

BlackRock lost $1.7 trillion of clients’ money during the first half of 2022, which the company attributed to rising inflation, interest rates, and general market carnage. The trillion-dollar loss is the largest amount of money ever lost by a single firm over a six-month period, according to Bloomberg.