Republican state officials have pulled approximately $11.7 billion from BlackRock since the beginning of 2022 in reaction to the asset management companys commitment to the ESG movement, according to a Daily Wire analysis.
The divestments, constituting a drop in the bucket in comparison to the nearly $8 trillion managed by BlackRock, occur as market forces react against the investment philosophy, which argues that firms have a responsibility beyond maximizing profits for shareholders with respect to their environmental, social, and corporate governance commitments.
Divestments began in January when West Virginia State Treasurer Riley Moore announced the state would no longer use BlackRock to manage roughly $8 billion in operating funds due to the companys advocacy of net zero investment strategies, which discourage investments in the fossil fuel industry despite strong returns the sector has returned throughout the year. Its almost along the lines of a religious fervor, where theyre willing to take a loss to further their political ideology, Moore commented in an interview last month with The Daily Wire. They need to be maximizing returns for their beneficiaries.
The action was followed in March with a $125 million divestment from the state of Arkansas, as well as a $100 million divestment in September from the state of Utah. The month of October saw a $794 million divestment from Louisiana, a $200 million divestment from South Carolina, and a $500 million divestment from Missouri. Florida likewise removed $2 billion from the company earlier this month, asserting that the mission to change the world promoted by BlackRock CEO Larry Fink exposes the states resources to significant financial risks.
Among other issues, officials in the conservative-leaning states expressed concern that the ESG movement may present obstacles to state pension funds and other entities seeking access to capital markets as ratings agencies downgrade bond ratings linked to cultural matters unrelated to financial health. ESG activists have pushed stockholders for companies such as Walmart and Lowes to consider abortion-related proposals ahead of the Supreme Courts recent decision to overturn Roe v. Wade .
Those decisions really have nothing to do with the underlying credit quality of a state government or of a corporation that is operating in that state, Missouri State Treasurer Scott Fitzpatrick said during an interview with The Daily Wire earlier this year. Its going to drive up the cost for taxpayers in states that dont subscribe to this ideology.
Critics of the ESG movement say that the philosophy mingles political causes in a manner that exposes investors to risks. ESG investments have suffered over the past year as languishing technology stocks, which rank highly in ESG ratings due to the underlying companies involvement in social issues, fall behind outsized profitability from energy stocks, which rank poorly due to worries regarding carbon emissions.
As the debate over the ESG movement continues to make national headlines, Fink announced last month that institutional clients would be permitted to vote their own shares rather than allow the company to act as a proxy, offering a measure of freedom to investors who desire to recuse themselves from ESG efforts. BlackRock has taken voting action on climate issues against dozens of portfolio companies, according to a stewardship report published two years ago.
Indeed, an exclusive poll from The Daily Wire conducted in May showed that 64% of respondents believe the individual investors whose savings are being invested should decide whether retirement and pension funds are allocated according to ESG standards, while a mere 20% believe that Wall Street asset managers should make such decisions.
Officials have also taken action against Vanguard and State Street, which have coordinated their efforts with BlackRock on ESG proposals. Vanguard will no longer participate in the Net Zero Asset Managers initiative, through which members promise to move portfolio companies closer to eliminating net carbon emissions by 2050 or sooner, after multiple attorneys general filed motions seeking to prevent Vanguard from purchasing shares in publicly traded utilities out of a concern that the companys climate efforts would decrease nationwide grid reliability.
