Florida divests a record $2B from BlackRock over continued ESG spat

In the latest strike against stakeholder activism, Florida said Dec. 1 that it will divest $2 billion in assets under management by BlackRock Inc. The action is the largest state divestment to date due to a financial firm's environmental, social and governance policies.

"Using our cash … to fund BlackRock's social-engineering project isn't something Florida ever signed up for," state CFO Jimmy Patronis said in a statement. "It's got nothing to do with maximizing returns and is the opposite of what an asset manager is paid to do."

BlackRock has "openly stated they've got other goals than producing returns," Patronis added.

The New York-based asset manager rejected suggestions that it is not focused on driving returns for its clients.

"We are surprised by the Florida CFO's decision given the strong returns BlackRock has delivered to Florida taxpayers over the last five years," BlackRock said in an emailed statement. "Neither the CFO nor his staff has raised any performance concerns. We are disturbed by the emerging trend of political initiatives like this that sacrifice access to high-quality investments and thereby jeopardize returns, which will ultimately hurt Florida's citizens."

The company also noted that the amount Florida is divesting is just a small share of its clients' investments. U.S. clients awarded BlackRock $84 billion of long-term net inflows during the third quarter and $275 billion over the last 12 months, the company said. In all, BlackRock has invested more than $65 billion in Florida's economy, it stated.

Red states vs. blue

In 2020, BlackRock CEO Larry Fink called on companies to start planning for a net-zero carbon emissions world, citing the risk that a warming world poses to economies. That view, coupled with climate initiatives such as the United Nations-led Net-Zero Banking Alliance, has come under fire over the past year from Republican officials who accuse companies of pursuing liberal and "woke" ideologies.

At the same time, investment firms face pressure from blue states such as New York for not decarbonizing their investment portfolios fast enough.

"Let's put this in perspective," Justin Guay, global climate strategy director for the social change network Sunrise Project, tweeted Dec. 1. Florida "pulled $2 billion but states who care about climate risk and clean energy dwarf them. New York State Common [Retirement Fund] alone has $200 billion in total [assets under management], 100x these clowns."

Florida's divestment announcement follows a string of similar state actions against financial firms in recent months as the debate over ESG, and especially companies' environmental policies, heats up. Louisiana in early October said it would pull nearly $800 million from BlackRock by the end of the year, and Missouri has withdrawn $500 million in investments. BlackRock is among the companies that have sought to stave off such actions by pointing to their continued investments in fossil fuel industries.

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