News analysis
BlackRock dealt another ESG blow in US
Another US state has launched a scathing attack on BlackRock Inc, the world’s largest investor, for its support of environmental, social and governance policies.
Louisiana has joined the likes of Texas and Florida in punishing the company for its pro-ESG stance – one that will hurt competition, harm profits, and cost local taxpayers, they say.
It’s the latest in a string of condemnation that BlackRock and other ESG-conscious investors are receiving from fiscally conservative US states.
What’s going on?
“I refuse to spend a penny of Treasury funds with a company that will take food off of tables, money out of pockets and jobs away from hardworking Louisianans”
John Schroder letter to BlackRock – 05/10/2022
Louisiana State Treasurer John M. Schroder has announced that he will divest state funds away from BlackRock in response to its ESG policies.
The total impact of the move is estimated to be $794 million. $560 million of that has already been divested, according to a letter sent by Schroder to BlackRock this week.
“Your blatantly anti-fossil fuel policies would destroy Louisiana’s economy,” Schroder told the firm.
“…According to my legal counsel, Environmental, Social and Governance (ESG) investing is contrary to Louisiana law on fiduciary duties, which requires a sole focus on financial returns for the beneficiaries of state funds.”
“Focusing on ESG’s political and social goals or placing those goals above the duty to enhance investors’ returns is unacceptable under Louisiana law.”
Is this big news?
Yes.
Not only is it another episode in the developing backlash against ESG in America, but this one is particularly ferocious.
Schroder’s letter doesn’t stop at simply announcing a major divestment. It accuses BlackRock of failing Louisianans, depriving them of basic living essentials in the name of ESG.
It accuses the company of undermining basic democratic norms and deciding to pursue ESG without an electoral mandate.
“So much for democracy,” one of Schroder’s paragraphs concluded. ‘It [ESG] threatens our democracy, bypasses the ballot box and allows large investment firms to push political agendas.”
What is the broader context?
More of the same. As the world’s largest investor, and with its vocal embrace of ESG, BlackRock has become the principal target for fiscal conservatives looking to protect the fossil-fuel industry, or resist pressure to conform to welfare or sustainability-focused standards.
In states controlled by conservatives, like Louisiana, lawmakers have far more power to attack businesses connected to ESG directly.
Similar attacks recently happened in Texas and Florida, primarily using new pension fund restrictions to block investment in these businesses.
Has BlackRock given any response?
The Corporate Governance Institute reached out to BlackRock Thursday for comment.
The company responded by saying it was “disturbed by the emerging trend of political initiatives that sacrifice pension plans’ access to high-quality investments – and thereby jeopardise pensioners’ financial returns.”
It is a reiteration of part of a letter sent to 19 Republican attorneys general who had criticised BlackRock’s ESG policies in August of this year.
In it, Dalia Blass, senior managing director and head of external affairs, defended her company’s stance and dismissed “inaccurate” accusations made against it.
What’s next?
There are two things to watch:
- How far will US politicians go to try and shut down ESG investing?
- How much will this movement inspire similar efforts in other jurisdictions? Most other major global economies are not seeing this kind of pushback… yet.
For now, it is looking increasingly sure that polarised politicians have swept ESG into their endless tug of war. It means the concept will likely be entirely supported or opposed, with little wiggle room in between.
