Florida’s Chief Financial Officer Jimmy Patronis announced Thursday that Florida will begin pulling over $2 billion in assets from BlackRock because of the firm’s environmentally and socially (ESG) motivated investing standards.
Patronis’ announcement came a day after he participated in a panel discussion on the “efforts to combat Environmental, Social, and Governance policies” during an event held by the conservative American Legislative Exchange Council in Washington, D.C.
Patronis said that BlackRock is using its money to pursue “ideology” rather than secure profits for its clients, according to a press release.
Florida’s State Treasury will begin to remove roughly $1.43 billion worth of long-term securities from BlackRock’s control as well as approximately $600 million worth of short-term investments managed by the firm.
“As Florida’s Chief Financial Officer, it’s my responsibility to get the best returns possible for taxpayers. The more effective we are in investing dollars to generate a return, the more effective we’ll be in funding priorities like schools, hospitals, and roads. As major banking institutions and economists predict a recession in the coming year, and as the Fed increases interest rates to combat the inflation crisis, I need partners within the financial services industry who are as committed to the bottom line as we are – and I don’t trust BlackRock’s ability to deliver,” said Patronis.
“BlackRock CEO Larry Fink is on a campaign to change the world. In an open letter to CEOs, he’s championed ‘stakeholder capitalism’ and believes that ‘capitalism has the power to shape society.’ To meet this end, the asset management company has leaned heavily into Environmental, Social, and Governance standards – known as ESG – to help police who should, and who should not gain access to capital.
“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. I think it’s undemocratic of major asset managers to use their power to influence societal outcomes. If Larry, or his friends on Wall Street, want to change the world – run for office. Start a non-profit. Donate to the causes you care about.
“Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for. It’s got nothing to do with maximizing returns and is the opposite of what an asset manager is paid to do. Florida’s Treasury Division is divesting from BlackRock because they have openly stated they’ve got other goals than producing returns. As Larry Fink stated to CEOs ‘[A]ccess to capital is not a right. It is a privilege.’ As Florida’s CFO I agree wholeheartedly, so we’ll be taking Larry up on his offer. There’s no lack of companies who will invest on our behalf, so the Florida Treasury will be taking its business elsewhere.”
The asset manager aims to push the world towards producing “net zero” emissions by 2050 and sees climate change as a severe financial risk, according to BlackRock CEO Larry Fink’s 2022 letter to executives.
In August of 2019 Republican attorneys general accused BlackRock of violating its duty to make money for its clients by allegedly boycotting fossil fuel companies.
Patronis claimed that BlackRock, which manages $8 trillion in assets, has used environmental, social and corporate governance (ESG) investing practices to decide which companies receive investment as well as influence societal outcomes in an “undemocratic” manner.
The Florida CFO stated that he cannot trust BlackRock with the state’s money as he doubts the firm’s dedication to seeking a return on investment.
“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 a statement. “Neither the CFO nor his staff have raised any performance concerns.”
Florida will have divested all its assets from BlackRock by the beginning of 2023 and transfer those assets to other asset managers. Missouri Treasurer Scott Fitzpatrick withdrew $500 million worth of pension funds from BlackRock’s management on Oct. 18, arguing that the firm uses its control of pension funds to push a “left-wing” agenda.
“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,” BlackRock stated. “Fiduciaries should always value performance over politics.”
In August, Patronis, Gov. Ron DeSantis, and Attorney General Ashley Moody, in their roles as trustees of the State Board of Administration, approved a resolution that directed pension-fund managers against using ESG ratings when investing state money.
Meanwhile, new House Speaker Paul Renner, R-Palm Coast, also has made combatting ESG a priority.
During an address to the House during a Nov. 22 organization session, Renner called for investment changes by the state to move away from Wall Street companies that have adopted “radical environmental and diversity goals.”
Renner called the ESG practice an “ideological sham” that “increases our cost of living, undermines our national security, and bypasses the checks and balances of the democratic process.”
“Just last year, credit rating agencies began requiring our state to provide data to measure our compliance with ESG’s political dogma,” Renner said. “ESG scoring will soon become a factor in our state’s credit rating, meaning fiscally irresponsible states like California could receive a better credit rating than Florida simply because they embrace ESG’s political agenda.”