Florida Targets BlackRock for ‘Stakeholder Capitalism’
Florida, in a unanimous move, has decided to divest $2 billion worth of assets currently managed by the fund managers of BlackRock. It seems that the ESG investing policies undertaken by the investment management company have not gone down well with the conservative Republican government in Florida.
The Chief Financial Officer of the state attacked BlackRock, saying that the company’s “campaign to change the world” using the state’s wealth would not be accepted.
BlackRock and Its Sustainable Investment Policies
BlackRock is one of the major Investment Management companies that made tackling climate change a major criterion in how they select companies to invest in. Back in 2020, led by CEO Larry Fink, the company announced that it would start avoiding investments in companies associated with fossil fuels that contribute to adverse climate change. They had also announced that they would start creating funds that strictly keep fossil-fuel stocks out of the portfolio.
Maximising Returns vs Saving the World
In this context, Jimmy Patronis, the Chief Financial Officer, said that if BlackRock wanted to save the world, it should have donated or started a non-profit organisation. Representing Florida, Patronis further said that Florida had not signed up for its wealth to be used by what he terms “social engineering project.”
Patronis lambasted BlackRock’s ‘stakeholder capitalism’, saying that the ESG policies of the company go against the main purpose of investing – to maximise profits. To summarise, Florida is going to divest from BlackRock because, according to Patronis, the investment management company has aims other than producing a good return on investment.
It should be noted that other Red states have also opposed BlackRock’s ‘stakeholder capitalism. States like Texas and Missouri have made efforts to make sustainable investment strategies toothless.
According to Republican leaders, ESG-based investment policies give undue stress on climate change and actively avoid fossil fuel-based companies. This kind of objective, according to Republican party leaders, is going to hurt the performance of the funds managed by such “woke” companies.
The Response of BlackRock
BlackRock has given an emphatic response to the decision made by the Florida government. As a trusted financial partner, the company said its main aim is to enable quality ROI for its clients. Over the last five years, as per BlackRock’s statement, the investment management company has given impressive returns on the wealth invested by the state of Florida. So, in spite of that, this decision of divestment has surprised the company.
The Problem of Pleasing Everyone
BlackRock’s decision to pursue ESG-based investment policies stems from the larger public pressure. So, in 2020, when the company announced its decision to avoid fossil fuel-based companies and introduce funds that excluded climate-change-causing companies, activists lauded the decision. Despite that, the climate activists did not forget to add that BlackRock had remained invested in coal, oil and gas companies, like Exxon Mobil or Chevron.
On the other hand, to keep the status quo intact, the company, along with Vanguard, had opposed more than 80% of motions at fossil fuel companies that could have otherwise fought climate change.
Both Sides of HorseShoe Against BlackRock
On the one hand, there is the extreme left that lambasts BlackRock for its alleged anti-people, anti-climate activities. And on the other hand, there is the extreme right that is now lambasting the company for its ESG policies. It’s an interesting situation.
