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Updated March 24th, 2024 at 16:04 IST

US red state funds withdraw $13.3 Billion from BlackRock in anti-ESG campaign

This withdrawal amounts to approximately one-tenth of 1 percent of BlackRock's $10 trillion in assets under management.

Reported by: Business Desk
Former BlackRock Manager David Tovey to Lead New Hedge Fund Covale Capital
Republican anti-ESG campaign | Image:BlackRock
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ESG investing: In an ongoing Republican effort to penalise BlackRock for its stance on climate change and environmental, social, and governance (ESG) factors, nearly $13.3 billion has been withdrawn from the world's largest asset manager, as reported by the Financial Times.

This withdrawal amounts to approximately one-tenth of 1 percent of BlackRock's $10 trillion in assets under management, although several Republican state pension funds still maintain significant holdings with the firm, surpassing $20 billion in some cases, the report said. Despite these withdrawals, BlackRock reported $138 billion in net inflows in the Americas last year.

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The recent announcement by the Texas Permanent School Fund to withdraw $8.5 billion by the end of April marks the largest removal by Republican-run pension funds to date.

In response to conservative attacks and pressure, BlackRock has taken steps to address concerns. The firm hired a senior lobbyist with Republican ties in Washington and co-hosted a power grid investment summit in Houston with Texas's lieutenant-governor, Dan Patrick, who has expressed reservations about BlackRock's approach to ESG investing, the FT report said.

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Furthermore, BlackRock has adjusted its participation in industry alliances focused on climate change, scaling back its commitment to Climate Action 100+ along with other asset managers like State Street, JPMorgan Asset Management, Pimco, and Invesco, some of which have withdrawn entirely.

However, BlackRock strongly contested the Texas fund's decision to withdraw funds, stressing the benefits of their partnership with Texas schools and families.

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The movement to divest from BlackRock gained momentum in 2022 when West Virginia state treasurer Riley Moore included the firm on a list of financial institutions boycotting fossil fuel companies. Other Republican-led states such as Texas, Florida, and Missouri followed suit with anti-ESG initiatives and divestments.

Despite these withdrawals, BlackRock has continued to attract significant investor inflows, totaling more than $355 billion during the same period.

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The effectiveness of the divestment campaign varied across states. Kentucky officials opted not to divest from BlackRock, citing fiduciary duty, while North Carolina's treasurer publicly criticised BlackRock while retaining holdings valued at $18.4 billion.

In Texas, concerns have been raised about the state's "Fair Access" laws, which mandate divestment from financial firms deemed hostile to fossil fuels or firearms. A recent study associated with the Texas Chamber of Commerce warned that such laws could harm the state's business climate and result in substantial tax revenue losses.

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Published March 24th, 2024 at 16:04 IST

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