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Nearly two years into a Republican campaign to punish BlackRock for insisting that climate change carries financial risk, red state investment funds have pulled about $13.3bn from the world’s largest asset manager.
That figure is roughly one-tenth of 1 per cent of BlackRock $10tn in assets under management, and some Republican state pension funds still have well north of $20bn parked with the money manager. Overall, BlackRock reported $138bn in net inflows in the Americas last year.
The $13.3bn in withdrawals includes last week’s announcement by the Texas Permanent School Fund that it would pull $8.5bn at the end of April, the largest removal to date by Republican-run pension funds.
BlackRock has been trying to respond to the campaign against environmental, social and governance factors in different ways. In Washington it added a senior lobbyist with Republican ties. Last month, the company co-hosted a power grid investment summit in Houston with Dan Patrick, Texas’s lieutenant-governor. Patrick has previously expressed “grave concerns” about the group’s use of ESG factors in investing.
Conservative attacks over the climate change issues have coincided with new caution by BlackRock and other asset managers over participating in industry alliances that seek to tackle climate change. BlackRock has scaled back its commitment to Climate Action 100+ while State Street, JPMorgan Asset Management, Pimco and Invesco have withdrawn entirely.
But BlackRock hit back hard after the Texas fund made its announcement.
“Ending a long, successful partnership that has been a positive force for thousands of Texas schools and families in such a reckless manner is irresponsible,” BackRock’s chief client officer, Mark McCombe wrote to Aaron Kinsey, chair of the Texas State Board of Education, in a letter asking for the decision to be reconsidered.
BlackRock declined to comment on the size of red state ESG-related divestments.
The outflows started in 2022 after West Virginia state treasurer Riley Moore included BlackRock on the nation’s first list of financial firms deemed to boycott fossil fuel companies. Texas, Florida, Missouri and other GOP-led states followed suit with anti-ESG initiatives and divestments.
During that period, investors have poured more than $355bn in new net flows into BlackRock’s products.
The divestment campaign foundered in Kentucky, where pension officials said moving billions of dollars out of BlackRock and other firms that use ESG factors would violate their fiduciary duty to maximise returns.
In North Carolina, state Republican treasurer Dale Folwell has publicly criticised BlackRock while leaving $18.4bn with the money manager. Folwell said he has negotiated for lower fees and now votes the state’s holdings in proxy votes rather than letting BlackRock do so. Folwell said he cannot find a less expensive asset manager, even as he called for Larry Fink’s firing as BlackRock chief executive.
“There’s only one fingerprint on this whole strategy, and you know how unique a fingerprint is — and that fingerprint is his,” Folwell said.
In Texas, local businesses have raised concerns about the state’s “Fair Access” laws, which call for the state and local governments to divest from financial firms that are considered hostile to fossil fuels or firearms.
A study released last month by a non-profit associated with the Texas Chamber of Commerce found that the laws could undermine the state’s efforts to foster a pro-business climate and cost the state $37.1mn in lost tax revenue.
“In simple terms, when government attempts to mandate values (no matter what kind) to business, the market loses, and taxpayers bear the consequences,” the study said.