Florida’s chief financial officer said Thursday his department would retire $2 billion worth of assets managed by BlackRock Inc, the largest such divestment by a state that opposes the asset manager’s environmental, social and corporate policies.. corporate governance policies (ESG).
The move will hardly make a dent in BlackRock’s $8 trillion assets and prompted a strong response from the company, which said the move put politics before investor interests.
But it underscores how a backlash against sustainability investing is gathering steam among Republican leaders in Florida and elsewhere, who criticize corporations for focusing on issues like climate change or workforce diversity.
The Republicans are set to take over the US House of Representatives in January. This will allow them to hold ESG hearings and question company executives about their policies, as well as pressure regulators to scrutinize them.
In a statement, Florida Chief Financial Officer Jimmy Patronis said the state Treasury, which he oversees, would remove BlackRock as manager of approximately $600 million of short-term investments and have its custodian freeze $1.43 billion of long-term securities now with BlackRock, with an eye on reallocating the money to other money managers by early 2023.
Patronis accused BlackRock of focusing on sustainability rather than higher returns for investors.
“The Florida Division of the Treasury is disposing of BlackRock because they have openly stated that they have other goals besides generating returns, ” Patronis said in the statement provided by his office.
When asked about the move, BlackRock said in a statement: “We are concerned about the emerging trend of policy initiatives like this one sacrificing access to high-quality investment and therefore jeopardizing returns, ultimately instance will hurt the citizens of Florida. Trustees should always value performance over policy.”
Neither Patronis nor his office have raised performance concerns, BlackRock said, adding that it has invested more than $65 billion in Florida-based companies, municipal bonds and other securities.
While BlackRock has encouraged portfolio companies to take steps like 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 resisted calls for measures such as divestment from oil companies.
So far, only Republican-controlled states have made major reallocations away from BlackRock, including $794 million withdrawn by Louisiana’s treasurer and $500 million by Missouri’s treasurer, both in October.
Other companies are also facing Republican scrutiny.
Earlier this week, Republican attorneys general from several states asked a federal regulator to limit the activities of Vanguard Group Inc over ESG concerns and asked United Parcel Service Inc(UPS.N)and FedEx Corp.(FDX.N)to clarify their policies on the tracking of firearms.