Blackrock Divests $2 Billion in ESG from Florida
American multinational and one of the world’s largest asset management companies, BlackRock, is facing controversy for supporting sustainable investing in companies that are prioritising ESG. Yes, controversy. This is because the pro-ESG policy doesn’t sit well with Florida, which has pulled out USD 2 billion of assets under BlackRock management.
The divestment comes at a time when US politicians, primarily Republicans, have gone on a surge to freeze corporations that are focussed on global climate change concerns and other critical aspects of ESG, namely, inclusivity and diversity of the workforce. In a statement, Florida’s Chief Financial Officer, Jimmy Patronis said, “BlackRock CEO Larry Fink is on a campaign to change the world. Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for.” He also stated that he would remove BlackRock as an asset manager of USD 600 million of short-term investments and have its custodian freeze USD 1.43 billion of long-term securities and transfer the money to another asset manager by 2023.
Earlier, the state of Louisiana also pulled out USD 794 million of state money from BlackRock, citing similar reasons for the asset manager’s support of ESG investing. Similarly, Missouri has also pulled out USD 500 million of pension funds that were being managed by BlackRock over the company’s pushing narrative of ESG. The asset manager has been receiving a lot of backlash and scrutiny from many states in the US for its support for ESG and sustainable investment. It is important to note that BlackRock is regarded as one of the industry leaders in environmental, social and governance, with almost USD 10 trillion in assets under management. So, the criticism the company is currently facing is mostly due to the prioritisation of politics and ideological differences between pro-ESG liberal elements versus conservative sentiment.
Regarding the huge divestment, BlackRock released a statement saying, “We are disturbed by the emerging trend of political initiatives like this that sacrifice access to high-quality investments and thereby jeopardise returns, which will ultimately hurt Florida’s citizens. Fiduciaries should always value performance over politics.”
Sustainable investing has garnered a lot of attraction from investors, stakeholders and corporations globally, with a focus on adhering to ESG principles to guide the investment process. However, it has also drawn a lot of criticism from corporations terming it as ‘greenwashing’ and questioning the transparency of ESG ratings. The divide is real but the question still remains whether or not ESG investments are fruitful for environmentally conscious investors or a simple ‘tactic’ by corporations to do away with the climate problem for profit-making.
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