Red state investment funds pulled $13.3bn out of BlackRock, the world’s biggest asset manager, nearly two years after the Republican campaign began to punish BlackRock because it insisted that climate change poses a financial risk.
This figure represents approximately one-tenth percent of BlackRock$10tn assets under management. Some Republican state pension funds have more than $20bn with the money manager. BlackRock reported net inflows of $138bn to the Americas region in 2018.
The $13.3bn includes the $8.5bn announced by the Texas Permanent School Fund last week, which will be removed at the end April. This is the largest withdrawal to date for Republican-run pension funds.
BlackRock has tried to respond in various ways to the campaign against social, environmental and governance factors. It has hired a senior Republican lobbyist in Washington. The company hosted a investment summit with Dan Patrick, Texas lieutenant governor, in Houston last month. Patrick previously expressed “grave concern” over the group’s investment strategy that incorporates ESG factors.
BlackRock, along with other asset managers, has become more cautious about joining industry alliances to combat climate change. BlackRock has reduced the commitment it made to Climate Action100+, while State Street Asset Management, JPMorgan Asset Management and Pimco have all withdrawn.
BlackRock retaliated hard against the Texas fund after its announcement.
Mark McCombe wrote Aaron Kinsey (chair of the Texas State Board of Education) in a letter that ending a successful partnership, which has been a force for positive change in thousands of Texas schools, and families, is irresponsible. He asked for this decision to be reviewed. *
BlackRock has declined to comment on how much money it is investing in red states ESG related divestments.
In 2022, the outflows began after West Virginia State Treasurer Riley Moore placed BlackRock on a list of financial companies that were deemed to be boycotting fossil fuel companies. Texas, Florida and Missouri, along with other GOP-led state, followed suit and implemented anti-ESG measures and divestments.
BlackRock has seen more than 355 billion dollars in net new flows from investors during that time.
Divestment efforts in Kentucky failed, as pension officials claimed that moving billions out of BlackRock or other firms who use ESG would be a violation of their fiduciary duties to maximize returns.
Dale Folwell, the Republican Treasurer of North Carolina has publicly criticized BlackRock. However, he left $18,4bn in BlackRock’s hands. Folwell claimed he had negotiated lower fees, and now votes for the state’s holdings through proxy votes instead of letting BlackRock vote. Folwell claimed he could not find a cheaper asset manager while calling for Larry Fink to be fired as BlackRock’s chief executive.
Folwell stated, “There is only one fingerprint that can be found on the entire strategy. You know how unique fingerprints are — and it is his fingerprint.”
Local businesses in Texas have expressed concern about the “Fair Access Laws” of the state, which require the state and local government to divest themselves from financial companies that are hostile to fossil-fuels or firearms.
According to a study published last month by an organization associated with the Texas Chamber of Commerce, the laws could undermine efforts made by the state to promote a business-friendly climate. The state would also lose $37.1mn of tax revenue.
The study stated that “in simple terms, when the government attempts to mandate business values (no matters what kind), the market loses and the taxpayers suffer the consequences.”