Louisiana State Treasurer John Schroder is not sure why his latest announcement is making the news. On Wednesday, he sent a letter to BlackRock CEO Larry Fink to inform him that Louisiana will divest all Treasury funds from the investment firm. To date, Schroder’s office has removed $560 million from BlackRock funds, and a total of $794 million will be removed by year’s end. Schroder is taking issue with BlackRock’s intent to push an Environmental, Social, and Governance (ESG) agenda ahead of investment growth.
“I have been the State Treasurer for five years, and this is not the first time I have had to battle financial institutions trying to push a political agenda,” Schroder said during an interview. A few years ago, banks tried to punish Louisiana for its laws supporting the Second Amendment. “If you want to change gun policy in Louisiana, go to the legislature and get a law passed that the governor will sign. Then I will follow it,” he said. “You don’t get to use financial pressure to go around the legislative process.”
Schroder said he and his team have been working on divesting state funds from BlackRock for over a year and a half. The decision followed numerous reports that BlackRock pressures companies to embrace ESG investment strategies that would harm the fossil fuel industry. “If you are on the warpath against the oil and gas industry, you are working against the best interests of the citizens of Louisiana.” It is a vital part of Louisiana’s economy. “I refuse to spend a penny of Treasury funds with a company that will take food off tables, money out of pockets, and jobs away from hardworking Louisianans.”
His letter comes after a meeting with BlackRock representatives. Schroder said the representatives’ statements directly contradicted Fink’s public messaging. Fink’s letters to shareholders and comments at public meetings routinely call for an end to investment in fossil fuels. At the recent Clinton Global Initiative meeting, Fink told the audience that higher energy prices are a good thing because they reduce the “green premium,” and called to change the charters for global central banks to force them to facilitate his global ESG agenda.
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Schroder wrote, “ESG investing violates Louisiana law on the fiduciary duties which require a sole focus on financial returns for the beneficiaries of state funds. A focus on political or social goals or placing those goals above the duty to enhance investors’ returns is unacceptable under Louisiana law.”
In his letter, Schroder reminded Fink of a few salient facts related to the decision to move Louisiana’s funds:
You have admitted that your ESG agenda of forcing behaviors will not increase investor returns. Your 2022 letter to CEOs stated plainly that “We need to be honest about the fact that green products often come at a higher cost.” High cost/low return environmental policies will reduce a company’s profits…and investors’ returns.
Then there is the matter of returns. Recently Blackrock set a record for “the largest amount of money lost by a single firm over a six-month period” having “lost $1.7 trillion of clients’ money,” associated with ESG accounts, according to a July 20, 2022 Bloomberg article titled “BlackRock Is Breaking the Wrong Kind of Records.” Such huge losses would seem to indicate that BlackRock is either not focused on investor returns or that its ESG investment strategy is flawed. Neither bodes well for investors.
While he acknowledges that BlackRock continues to invest in oil and gas companies, he concluded that it does not counterbalance the investment firm’s stated intent to force those companies—and all others—to adopt ESG-friendly practices, regardless of whether they are in the best interest of their investors. “They are pushing political agendas contrary to the best interests of the people whose money they are using!” Schroder wrote.
He added, “There is a difference between offering an ESG investment option for those investors so inclined, and using other peoples’ non-ESG investments to promote ESG shareholder initiatives.” The state funds BlackRock manages include pension funds for municipal workers and teachers. While ESG proponents like to assert that shareholders demand companies take climate risk into account, it is not clear that it is accurate.
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Will Hild, executive director of Consumers’ Research, often points out that Fink uses other people’s money to push his woke political agenda and bet on China: “As noted in Treasurer Schroder’s letter, BlackRock is using the people of Louisiana’s money to advance a destructive agenda that raises costs for consumers in the state and across the country.” He continued, “The seeds of today’s energy crisis were planted by BlackRock and others in their reckless abandonment of their fiduciary duty to cozy up to radical, woke politicians. We are glad to see the Treasurer working to put an end to their economic vandalism.”
Schroder added that ESG investing allows companies like BlackRock to bypass the legislative process and push political agendas without being accountable to voters. Derek Kreifels, CEO of the State Financial Officers Foundation (SFOF), made a similar observation. “Ultimately, ESGs will encompass everything the Left can’t get done through the legislative process or the courts,” Kreifels warned.
He added, “BlackRock and other investment giants have weaponized ESG, pushing climate and social policy with no regard for the harm they are causing to everyday Americans and calling it an investment strategy. Their reckless agenda is robbing Americans of their retirement dollars and driving up the costs of everyday goods like groceries, gas, and energy. Louisiana’s divestment, the largest to date, follows similar actions by several states, including Utah, West Virginia, and Arkansas, with more actions likely coming soon.”
Joint and individual actions by the state financial officers and several state attorneys general to combat ESG scores and investing earned the SFOF an extensive hit piece in the New York Times. The paper accused the group of coordinated action using “public money and the law” to pressure businesses pushing “woke” causes. Schroder, the incoming chair of the group, pushed back on the allegation, saying, “Isn’t following the state law regarding how Treasury funds are used something I am supposed to do every day?”
Kreifels went further. “Laws about how state funds are invested and who manages them vary from state to state. Every state financial officer needs to balance the legal requirements with the economic realities their state faces,” he explained. “It would be impossible to coordinate a single response that would work for every state. The mission of the SFOF is to drive fiscally sound public policy through education and stakeholder engagement while keeping in mind the rule of law and the nation’s federalist structure.”
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