Anti-ESG backlash intensifies as Florida divests

December 8th, 2022

A holding $2bn in size is being divested from BlackRock by Florida, in the latest development of Republican US states shunning environmental, social, and governance-focused investment. 

The divestment includes $1.43bn worth of long-securities and $600m worth of short-term investments. 

Florida’s Chief Ffinancial Officer Jimmy Patronis has accused BlackRock of focusing on ESG rather than higher returns for investments. 

Therefore, the state’s treasury will be relocating investment responsibilities to other fund management firms at the beginning of 2023. 

In a statement, Patronis said: “Using out cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for. It’s got nothing to do with maximising returns and is the opposite of what an asset manager is paid to do.” 

Florida is the latest Republican state to disapprove of BlackRock’s prioritisation of ESG initiatives.  

Throughout the year, the world’s largest asset manager has been targeted by Louisiana, Texas, and West Virginia for its ESG standards.   

In September, Texas published a blacklist of ‘Financial Companies that Boycott Energy Companies’, which included BlackRock. 

The criticism highlights the growing backlash against ESG investing among republican leaders, many of whom believe it puts politics over investor interests. 

ESG investing remains a divided topic in America. Even though republican states warn against ESG investing, President Biden has increasingly championed the practice. 

Last month, Biden approved a final rule to allow fiduciaries to consider policies which protect against the threat of climate-related risk. 

In Florida, a different attitude is being taken to federal policy. 

CFO Patronis added: “Whether stakeholder capitalism, or ESG standards, are being pushed by BlackRock for ideological reasons, or to develop social credit ratings, the effect is to avoid dealing with the messiness of democracy.” 

BlackRock CEO, Larry Fink, has been outspoken on the need to consider climate change and sustainability in investment decisions.  The increasing attacks against Blackrock are signs of the debate around environmentally and socially conscious invesment is heating up.

In fact, Fink has also faced calls to resign for the “apparent hypocrisy” behind his firms ESG commitments. 

Giuseppe Bivona and Marco Taricco, co-chief investment officers of Bluebell, wrote a letter to Fink to express their concerns.  

Bluebell Capital Partners is a private equity firm, which has previously worked very closely with BlackRock. 

They wrote: “The contradictions and apparent hypocrisy of BlackRock’s actions have . . . politicised the ESG debate,” 

“The reputational damage of being dragged into this politically charged debate, in our view, is very significant because it calls into question the independency of BlackRock as an asset manager.” 

Despite the increasing debate over ESG investing from all sides, it continues to grow at a rapid pace.