Louisiana will liquidate its investments with BlackRock, totaling $794 million, in order to “protect” the state’s Treasury funds “from ESG,” according to a letter to the investment manager released by State Treasurer John Schroder.
According to a statement from the Treasury, the divestment comes in response to reports that “BlackRock has urged companies to embrace “net zero” ESG (Environmental, Social and Governance) investment strategies,” which would harm the state’s fossil fuel industry. Louisiana is a top-10 crude oil producing state, and the third largest U.S. producer of natural gas.
The move forms part of a growing anti-ESG push by Republican politicians in the U.S., which has recently culminated in actions such as Florida passing a resolution to no longer allow ESG considerations to be used by fund managers for its $228 billion of pension funds, and Texas publishing a list of fund managers – including BlackRock, Credit Suisse, UBS and several others – slated for potential divestment from its pension funds, due to their strong ESG credentials and support for net zero investing and advocacy.
BlackRock, as the largest global investment management company, and a leading voice in the investment community on climate change and energy transition-related themes, has found itself at the center of many of these efforts. Louisiana’s Jeff Landry was one of 19 Attorneys General to sign a letter in August accusing BlackRock of acting with “mixed motives” in its pursuit of an anti-fossil fuel and pro-net zero agenda for following a “social purpose” not aligned with a focus on financial returns.
In September, BlackRock responded to these claims, with a letter by Head of External Affairs Dalia Blass, hitting back at “misconceptions” raised about the firm, as well as what it called “several inaccurate statements” in the letter relating to the investor’s motivations for participating in ESG initiatives. The letter stressed that BlackRock’s climate focus is fully aligned with its fiduciary duty “to identify short- and long-term trends in the global economy that may affect our clients’ investments,” and that its engagement efforts are focused on asking companies for improved disclosure, and not on dictating emissions targets or lobbying activities. BlackRock also pointed out that has hundreds of billions of dollars invested in energy companies globally.
BlackRock’s September letter also implied that the recent anti-ESG initiatives may ultimately work against investors’ financial interests, with Blass stating that the firm is “disturbed by the emerging trend of political initiatives that sacrifice pension plans’ access to high-quality investments – and thereby jeopardize pensioners’ financial returns.”
While the new letter from Schroder acknowledges that BlackRock continues to invest in fossil fuel companies, the statement repeated the claim that the investor intends to force companies “to adopt ESG‐friendly practices, regardless of whether they were in the best interest of their clients.”
Schroder stated that ESG investing “threatens our democracy,” adding that he is convinced it is “a threat to our founding principles: democracy, economic freedom, and individual liberty.”
According to the letter, the treasury has already divested $560 million, with plans to liquidate the remainder over time.