Florida to Divest $2B From BlackRock Over ESG

December 02, 2022

Florida will begin divesting $2 billion in assets currently under management by BlackRock Inc. in response to the asset manager’s environmental, social and governance investment policies, the state’s Treasury department announced Thursday.  

A statement released by Florida’s Chief Financial Officer Jimmy Patronis said the state Treasury would immediately have Florida’s custody bank freeze approximately $1.43 billion in long-term securities and remove BlackRock as the asset manager for approximately $600 million worth of short-term overnight investments.  

The move comes amid accelerating pushback from conservatives over sustainable investing. 

“I think it’s undemocratic of major asset managers to use their power to influence societal outcomes,” Patronis said in a statement. “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.”  

The memo also stated Florida plans to pull all short- and long-term investments next year from the New York-based asset manager and relocate taxpayer funds to other management entities. 

Florida’s divestment of funds is the latest development in the Republican party’s campaign against sustainable investing, especially against BlackRock—which manages $8 trillion in assets globally and is the largest issuer of exchange-traded funds in the U.S. Earlier in October, the Republican-led states of Missouri and Louisiana pulled $500 million and $794 million, respectively, from BlackRock due to the asset manager’s ESG investment practices.  

The divestments follow a joint letter penned by 19 GOP attorneys to BlackRock in August stating the asset manager was not doing its fiduciary duty when using “the hard-earned money of [the] states’ citizens” to forward its “climate agenda” and not prioritizing financial returns. 

ESG-focused ETFs have $243.8 billion of assets under management in the U.S., according to ETF.com data.  

There was no immediate market reaction following news of Florida pulling money from BlackRock. The firm’s top ESG funds, such as the iShares ESG Aware MSCI USA ETF (ESGU) declined 0.37% and the iShares ESG Aware MSCI EM ETF (ESGE) gained 0.40% Friday. BlackRock did not immediately respond to a request for comment.

Questions on ESG Profitability 

Despite mounting criticism and questions about the ESG sector’s underperformance, BlackRock has emerged as one of the more vocal advocates of ESG principles in investing. CEO Larry Fink’s 2022 memo noted that “the tectonic shift towards sustainable investing is still accelerating.”  

An October report published by Morningstar found that sustainable products attracted $459 million during this year’s otherwise dismal third quarter, which continued to battle high inflation, rising interest rates and recession fears.   

Still, sustainable funds grew by 0.16% in the third quarter, whereas U.S. funds overall shrunk by 0.38%.  

Sustainable ETFs also made up the top 10 fund flows in Q3, including at least four ESG-focused funds: the iShares ESG Aware U.S. Aggregate Bond ETF (EAGG), the Nuveen ESG Large-Cap Value ETF (NULV), the Vanguard ESG U.S. Stock ETF (ESGV) and the iShares ESG Aware USD Corporate Bond ETF (SUSC), generating flows of $193 million, $102 million, $92 million and $72 million, respectively.  

 

Contact Zoya Mirza at [email protected] 

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