Arizona is moving forward with a plan to divest its pension funds from BlackRock amid concerns about the investment giant’s push for environmental, social and governance (ESG) policies that have prompted other states to take similar action.
Arizona Treasurer Kimberly Yee said in a statement released Thursday that the state treasury’s Investment Risk Management Committee (IRMC) has begun evaluating the relationship between the state pension fund and Black stone at the end of 2021
“Part of the IRMC review included reading the annual letters from CEO Larry Fink, who in recent years has begun dictating to businesses in the United States to follow his personal political beliefs,” Yee wrote. “In short, BlackRock has moved from a traditional asset manager to a political action committee. Our in-house investment team believes this has distanced the firm from its overall fiduciary duty as an asset manager.”
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In response to these findings, Yee noted that Arizona began releasing over $543 million of BlackRock’s money market funds in February 2022 and “reduced our direct exposure to BlackRock by 97%” over the year. Yee added that Arizona “will continue to reduce our remaining exposure to BlackRock over time through a phased approach that considers a safe and prudent investment strategy that protects taxpayers.”
Although the state will continue to hold some BlackRock stock through shares in a passive index of the top 1,500 U.S. corporations, Arizona will have “minimal direct exposure” to BlackRock, amounting to “less than 1-tenth of one percent of our total assets under management’ towards the end of November. Yee said Arizona intends to vote its shares in the index in an effort to “change BlackRock’s political activism.”
“We will continue to fight the dangerous path of companies pushing their social issues and wakeism into the investment space and return to traditional money management that puts people first,” Yee’s statement concluded.
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Black stone is currently the world’s largest asset manager with approximately $8 trillion under management and is one of several major financial institutions leading the charge to adopt ESG standards in recent years. The ESG movement as a whole strives for promoting a transition to green energy and leftist social priorities through the financial sector. Critics of the ESG movement argue that its focus on green investments conflicts with firms’ fiduciary responsibility to pursue the best possible returns for investors.
BlackRock countered criticism of its investment strategy in a statement to Fox Business that read in part: “Over the past year, BlackRock has been the target of campaigns suggesting we are ‘too progressive’ or ‘too conservative’ in the way we manage our money to the customers. We are neither. We are a fiduciary. We put our clients’ interests first and provide the investment choice and performance they need. We won’t let these campaigns deter us from delivering for our customers.”
The statement added: “In the US alone, clients awarded BlackRock $84 billion in long-term net flows in the third quarter and $275 billion over the trailing twelve months.”
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ESG policies pushed by BlackRock have drawn the ire of some investors and government politicians alike.
Florida’s chief financial officer announced recently that the state treasury is taking action remove about $2 billion in assets by BlackRock management before the end of this year. In October, Louisiana and Missouri announced that they will reallocate public pension funds away from BlackRock, amounting to approximately $1.3 billion in combined assets. Combined with the Arizona sale, approximately $3.8 billion in state pension funds have been sold by BlackRock from those four states alone.
In addition, North Carolina’s state treasurer called for the resignation of BlackRock CEO Larry Fink, and the Texas Legislature subpoenaed BlackRock for financial documents.
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The investment firm also came under fire from activists who argue that BlackRock is not doing enough to meet its ESG commitments. New York Comptroller Brad Lander wrote to Fink in September, citing a “troubling” discrepancy between the company’s words and its actions. Lander wrote, “BlackRock cannot simultaneously declare that climate risk is a systemic financial risk and claim that BlackRock has no role in mitigating the risks that climate change poses to its investments by supporting decarbonization in the real economy.”
BlackRock insists its “role in the transition is as a fiduciary to our clients” and “to help them navigate investment risks and opportunities, not to project a specific decarbonisation outcome in the real economy”.
Fox Business’ Breck Dumas contributed to this story.
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