Florida makes the largest anti-ESG divestment by withdrawing $2 billion from BlackRock

withdrawing $2 billion from BlackRock

The largest such divestiture by a state hostile to the asset manager's environmental, social, and corporate governance (ESG) principles was announced on Thursday by Florida's chief financial officer, who said his department will withdraw $2 billion worth of its assets managed by BlackRock Inc (BLK.N).

BlackRock responded strongly, claiming that the measure prioritized politics over the interests of investors. The move will hardly have any impact on BlackRock's $8 trillion in assets. However, it highlights how a pushback against ESG investing, which many Republican leaders, including those in Florida, regard as supporting a "woke agenda," is gaining ground.

The U.S. House of Representatives will be governed by Republicans starting in January. This will enable them to convene ESG hearings, question the CEOs of BlackRock and other significant asset managers regarding their ESG practices, and put pressure on regulators to examine them.

Jimmy Patronis, the state's chief financial officer, said in a statement that BlackRock would no longer manage about $600 million in short-term investments and that the state's custodian would freeze $1.43 billion in long-term securities currently under BlackRock's management with a view to reallocating the funds to alternative money managers by the beginning of 2023.

Patronis charged BlackRock with prioritizing ESG over higher investor returns.

In a statement released by his office, Patronis stated: "Florida's Treasury Division is divesting from BlackRock because they have openly declared they have other goals than earning profits."

BlackRock released a statement after being questioned about the decision "We are concerned about a new political trend that sacrifices access to top-notch investments and puts returns in danger, which will eventually harm Florida's population. Performance should always take precedence over politics for fiduciaries."

BlackRock said it has invested more than $65 billion in Florida-based businesses, municipal bonds, and other assets, adding that neither Patronis nor his administration had expressed any concerns about performance.

BlackRock said its efforts are focused on improving company performance and has resisted calls for actions like divesting from oil companies, even though it has encouraged portfolio companies to take steps like disclosing more information about their carbon emissions or adding more diverse board members. Democratic politicians in the United States claim BlackRock doesn't push ESG issues hard enough.

Only Republican-controlled governments have so far made sizable reallocations away from BlackRock, with the treasurers of Louisiana and Missouri pulling out $794 million and $500 million respectively in October.

Republicans are also scrutinizing other businesses. Earlier last week, Republican attorneys general from a number of states urged a federal regulator to restrict Vanguard Group Inc.'s operations because to ESG concerns. They also asked FedEx Corp. and United Parcel Service Inc. to clarify their tracking practices for shipments of firearms.

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