Florida pulls $2 bln from BlackRock in largest anti-ESG divestment

Dec 1 (Reuters) – Florida’s chief financial officer said on Thursday his department would withdraw $2 billion from its assets managed by BlackRock Inc. (BLK.N)the largest such divestment by a state opposed to the asset manager’s environmental, social and corporate governance (ESG) policies.

The move will hardly affect BlackRock’s $8 trillion in assets and drew a strong reaction from the company, which said the action put politics above investor interests. Nonetheless, it underscores how the backlash of many Republican leaders, like those in Florida, against ESG investing, which they see as promoting a “woke agenda,” is growing.

Republicans are expected to take control of the US House of Representatives in January. This will allow them to hold ESG hearings and grill the CEOs of BlackRock and other major asset managers on their ESG policies, and also pressure regulators to review 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 in short-term investments and request its custodian to freeze $1.43 billion in long-dated securities now with BlackRock, with an eye to reallocating the money to other fund managers by early 2023.

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

“Florida’s Treasury Division is divesting from BlackRock because it has openly stated that it has other goals than producing returns,” Patronis said in the statement provided by its office.

Asked about the move, BlackRock said in a statement that “we are troubled by the emerging trend of policy initiatives like this that sacrifice access to high-quality investments and thereby undermine returns, which will ultimately hurt to the citizens of Florida. Trustees should always value performance over politics.”

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

While BlackRock has encouraged its portfolio companies to take steps such as disclosing more data on their carbon emissions or adding more diverse members to the board, it said its efforts are aimed at improving company performance and have resisted calls for measures such as divestment from oil companies. US Democratic officials have argued that BlackRock is not emphasizing ESG concerns enough. Read more

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 also face Republican scrutiny. Earlier this week, Republican attorneys general from various states asked a federal regulator to limit the activities of Vanguard Group Inc on ESG concerns, and asked United Parcel Service Inc. (UPS.N) and FedEx Corp. (FDX.N) clarify their policies on tracking firearms shipments.

Reporting by Ross Kerber; Editing by Chizu Nomiyama

Our standards: The Thomson Reuters Trust Principles.

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