US Republicans pull $1bn from BlackRock

BlackRock has lost more than $1 billion in asset management business in US Republican states, where there is much dissatisfaction with the company’s green investment strategies; yet, these withdrawals have not had a material impact on the company’s profits.

Curtis Loftis, the state treasurer of South Carolina, stated in an interview that he would withdraw $200 million from BlackRock before the end of the year. John Schroder, the treasurer of Louisiana, announced last week that he was taking $794 million out of BlackRock. Marlo Oaks, the treasurer of Utah, claimed to have sold $100 million in BlackRock investments, and this year, Arkansas withdrew $125 million.

BlackRock entered the market as the trend of sustainable investment grew; since 2020, it has grown by $1 trillion. According to a recently released report, the business manages five of the top 20 US sustainable funds by assets, more than any other investment manager.

In addition to its fund offerings, BlackRock’s CEO Larry Fink has pushed businesses to reduce their carbon emissions and threatened to eliminate laggards from actively managed funds. These actions have made BlackRock a target in Republican states. For a $41 billion fund that his office oversaw, Loftis claimed he had previously turned down BlackRock as a manager because of reservations about its governance, social, and environmental practices. He claimed to have chosen Federated Hermes instead to oversee the fund.

Federated Hermes, based in Pittsburgh, provides ESG funds as well and frequently touts its leadership in this industry, particularly since the company bought Hermes in London in 2018. The State Financial Officers Foundation, a group of Republican treasurers that includes Loftis, has received a lot of funding from Federated. Federated Hermes was forced to discontinue its SFOF sponsorship in response to pressure from overseas pension funds. The SFOF website no longer lists any corporate sponsors.

Invesco and Fidelity were also listed as SFOF sponsors earlier this year. Loftis called Fink “a very smart guy” and expressed admiration for him. But he decried what he claimed was the hypocrisy of those promoting sustainable investing. “So much of it does not help the people it is supposed to help,” Loftis said. “That is why I have really gotten my back up.”

“Poor people, historical minorities, are having money and services diverted from them for these globalist, leftist ideas,” he said.

BlackRock declined to comment but referred the media to a letter it wrote to state attorneys general in August to defend its ESG practices. Analysts have claimed that BlackRock’s fundamental business had not been impacted by the Republicans’ moves to sever connections with it. He claimed that the BlackRock ETFs the Republicans had dropped were cash-like low-cost products. He noted that the Republicans’ response to the ESG was “political posturing” ahead of the elections in November.

US state treasurers often supervise bond sales, cash management, and some facets of a state’s retirement plans. Other financial institutions have also been targeted by Republican treasurers, even though BlackRock has become their favourite punching bag. By the end of November, the West Virginia treasurer’s office will no longer use JPMorgan Chase for its financial needs. According to the state treasurer, JPMorgan, BlackRock, and three other banks were expelled from West Virginia earlier this year for allegedly harming energy companies.

In Utah, Oaks claimed that he dropped BlackRock because of his fiduciary duty. Meeting with businesses to discuss climate change concerns was the company fulfilling a “dual mandate,” he claimed. “We need to ensure that the money is not being used to drive a separate agenda different from our fiduciary obligation,” he added.