According to a press release, Florida Chief Financial Officer Jimmy Patronis announced that the Florida Treasury would begin divesting $2 billion worth of assets currently under management by BlackRock. The State Treasury will immediately have Florida’s custody bank freeze approximately $1.43 billion worth of long-term securities and remove BlackRock as the manager of about $600 million worth of short-term overnight investments. Asset managers invest these taxpayer funds as part of Florida’s Treasury Investment Pool. By the beginning of 2023, the State Treasury will divest all short- and long-term investments from BlackRock and relocate investment responsibilities to other fund management entities.
Patronis said, “As Florida’s Chief Financial Officer, it’s my responsibility to get the best returns possible for taxpayers. The more effective we are in investing dollars to generate a return, the more effective we’ll be in funding priorities like schools, hospitals, and roads. As major banking institutions and economists predict a recession in the coming year, and as the Fed increases interest rates to combat the inflation crisis, I need partners within the financial services industry who are as committed to the bottom line as we are — and I don’t trust BlackRock’s ability to deliver. BlackRock CEO Larry Fink is on a campaign to change the world. In an open letter to CEOs, he’s championed ‘stakeholder capitalism’ and believes that ‘capitalism has the power to shape society.’ To meet this end, the asset management company has leaned heavily into Environmental, Social, and Governance standards – known as ESG – to help police who should, and who should not gain access to capital.”
At least one analyst downgraded BlackRock earlier this year because of the political risk associated with ESG investing. Following the third quarter release, UBS analyst Brennan Hawken downgraded the company’s stock from Buy to Neutral and dropped the target price to $585 from $700. Hawken’s note on the change cited growing pushback on BlackRock’s environment, social, and governance (ESG) investment strategy.
Just before the downgrade, Louisiana State Treasurer John Schroder informed BlackRock CEO Larry Fink the state would divest a total of $794 million in treasury funds from the asset manager for ignoring its fiduciary responsibility and focusing on ideological investing. Schroder now serves as the chairman of the State Financial Officers Foundation and says state leaders need to do what they think is best for their state to battle ESG and corporate boardroom activism following Patronis’s announcement. He added, “Divesting from BlackRock sends a very loud signal that states are no longer going to work with fund managers advancing a political agenda.”
Related: Working to Save the Energy Grid From ESG Investing
Patronis’s statement expanded on Schroder’s sentiment. “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. I think it’s undemocratic of major asset managers to use their power to influence societal outcomes. If Larry, or his friends on Wall Street, want to change the world – run for office. Start a non-profit. Donate to the causes you care about,” Petronis said.
He continued, “Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for. It’s got nothing to do with maximizing returns and is the opposite of what an asset manager is paid to do. Florida’s Treasury Division is divesting from BlackRock because they have openly stated they’ve got other goals than producing returns. As Larry Fink stated to CEOs ‘[A]ccess to capital is not a right. It is a privilege.’ As Florida’s CFO, I agree wholeheartedly, so we’ll be taking Larry up on his offer. There’s no lack of companies who will invest on our behalf, so the Florida Treasury will be taking its business elsewhere.”
In a panel on Wednesday, Petronis shared that Florida previously took back its proxy votes and will now vote its own shares in shareholder meetings. Asset managers like BlackRock usually pool their clients’ shares for them. BlackRock is a member of Climate Action 100 and The Net Zero Asset Managers Initiative, which require members to prioritize environmental issues rather than returns.
Consumers’ Research Executive Director Will Hill applauded the action taken by Florida: “Today’s announcement is monumental, as $2 billion worth of assets is now the largest divestment from BlackRock made by any state so far. Florida isn’t buying Larry Fink’s spin or lies and recognizes his radical ESG agenda, killing America’s energy independence, posing national security risks, and implementing progressive policies in American corporations.” He added, “We are thrilled to see Florida’s leadership protecting its citizens from the likes of BlackRock.” Consumers’ Research chronicles the activities of BlackRock and other companies and how ESG investing impacts consumers.
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