Arizona divests pension funds from BlackRock due to ESG pressure

Arizona continues its plan to pull pension funds out of BlackRock amid concerns over the massive investment firm’s environmental, social and governance (ESG) policies that have prompted other states to take similar action.

The state treasury’s Investment Risk Management Committee (IRMC) began evaluating the relationship between the state’s pension fund and BlackRock in late 2021, Arizona Treasurer Kimberly Yee said on Thursday.

“Part of the review by the IRMC included reading CEO Larry Fink’s annual letters, which in recent years have begun dictating to businesses in the United States to follow their personal political beliefs,” Yee wrote. “In short, BlackRock has moved from a traditional asset manager to a political action committee. Our internal investment team believed this moved the firm away from trusteeship as an asset manager in general.”


BlackRock offices in New York City. The company, along with nine others, was named hostile to the state’s fossil fuel industry by Texas Comptroller Glenn Hegar. (LightRocket / Getty Images via Erik McGregor/Getty Images)

In response to these findings, Yee noted that Arizona began disposing of over $543 million from BlackRock money market funds in February 2022, “reducing our direct exposure to BlackRock by 97%” over the course of the year. Yee added that Arizona will “continue to reduce our residual risk at BlackRock over time through a phased approach that takes into account the safe and prudent investment strategy that protects taxpayers.”

While the state will continue to hold some BlackRock stock through shares in the passive index of the largest 1,500 American companies, Arizona will have “minimal direct exposure” to BlackRock, amounting to “less than one-tenth of one percent of our total assets under management.” As of the end of November. Yee said Arizona plans to vote its shares in the index in an attempt to “change BlackRock’s political activism.”

Yee’s statement, “We will continue to fight back against the dangerous path of corporations pushing social issues and arousal into the investment space, and returning to traditional money management that puts people first.”


BlackRock CEO Larry Fink

BlackRock President and CEO Larry Fink arrived at the DealBook Summit in New York City on November 30, 2022. (Reuters/David ‘Dee’ Delgado)

Black Rock It is currently the world’s largest asset manager with approximately US$8 trillion under management and is one of the few major financial institutions to have pioneered the adoption of ESG standards in recent years. ESG movement in general promoting the green energy transition and leftist social priorities through the financial sector. Critics of the ESG movement argue that the focus on green investments goes against firms’ credible responsibility to generate the best possible returns for investors.

BlackRock backed down on criticism of its investment strategy by partly telling Fox Business, “Over the past year, BlackRock has been subject to campaigns suggesting we’re either ‘too progressive’ or ‘too conservative’ in the way we manage our investments. Neither have we. “We are a trustee. We put our clients’ interests first and provide the investment options and performance they need. We won’t let these campaigns stop us from delivering to our clients.”

“In the US alone, customers provided BlackRock with long-term net inflows of $84 billion in the third quarter and $275 billion in the last twelve months,” the statement said.


Larry Fink, CEO of BlackRock Inc., speaks in a Bloomberg Television interview Wednesday, April 19, 2017, in New York, USA.  Fink said there are indications that the U.S. economy is slowing as businesses weigh in whether the Trump administration will.  will be able to quickly pass tax reform and infrastructure program.  Photographer: Christopher Goodney/Bloomberg

Larry Fink, CEO of BlackRock Inc., speaks in a Bloomberg Television interview Wednesday, April 19, 2017, in New York, USA. (Christopher Goodney/Bloomberg via Getty / Getty Images)

ESG policies developed by BlackRock have drawn the ire of some investors and government policy makers alike.

Florida’s chief financial officer recently announced that the state treasury is taking action. eliminate nearly $2 billion in assets from BlackRock’s management before the end of this year. In October, Louisiana and Missouri announced that they would separate their government pension funds from BlackRock, which amounted to roughly $1.3 billion in total assets. Taken together with Arizona’s divestment, approximately $3.8 billion in state pension funds were divested from BlackRock by these four states alone.

Additionally, the North Carolina state treasurer has requested the resignation of BlackRock CEO Larry Fink, and the Texas legislature has sued BlackRock for financial documents.


The investment firm has also drawn backlash from activists who argue that BlackRock is not doing enough to meet its ESG commitments. New York City Auditor Brad Lander wrote a letter to Fink in September, describing an “alarming” discrepancy between the company’s words and actions. “BlackRock cannot simultaneously declare that climate risk is a systemic financial risk and argue that BlackRock has no role in reducing the risks posed by climate change to its investments by promoting decarbonisation in the real economy,” Lander said.

BlackRock insisted that “his role in the transition is to be a trustee for our clients” and “to help them navigate investment risks and opportunities, not to design a specific decarbonisation outcome in the real economy.”

Breck Dumas of Fox Business contributed to this story.

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