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After nearly two years of a Republican campaign to punish BlackRock for insisting that climate change poses financial risks, government investment funds have withdrawn about $13.3 billion from the world's largest asset manager.
That figure represents roughly a tenth of 1 percent of BlackRock's $10 trillion in assets under management, and some GOP government pension funds still have more than $20 billion parked with the money manager. Overall, BlackRock reported net flows of $138 billion in the Americas last year.
The $13.3 billion withdrawals include an announcement last week by the Texas Permanent School Fund that it would withdraw $8.5 billion at the end of April, the largest withdrawal yet by Republican-run pension funds.
BlackRock is trying to respond to the crackdown on environmental, social and governance factors in different ways. In Washington, it added a large lobby group with ties to the Republican Party. Last month, the company co-hosted an energy grid investment summit in Houston with Dan Patrick, Lieutenant Governor of Texas. Patrick has previously expressed “serious concerns” about the group's use of environmental, social and governance factors in investing.
Conservative attacks on climate change issues have coincided with new caution by BlackRock and other asset managers about participating in industry coalitions seeking to address climate change. BlackRock has scaled back its commitment to the Climate Action 100+ initiative, while State Street, JPMorgan Asset Management, Pimco and Invesco have withdrawn entirely.
But BlackRock responded forcefully after the Texas fund made its announcement.
“Ending a long and successful partnership that has been a positive force for thousands of Texas schools and families in such a reckless manner is irresponsible,” Mark McComb, chief customer officer at BackRock, wrote to Aaron Kinsey, chairman of the Texas State Board of Education. In a letter asking to reconsider the decision.
BlackRock declined to comment on the extent of ESG divestments in the red state.
The outflows began in 2022 after West Virginia State Treasurer Riley Moore included BlackRock on the nation's first list of financial companies considered to boycott fossil fuel companies. Texas, Florida, Missouri and other GOP-led states followed suit with anti-ESG and anti-divestment initiatives.
During that period, investors pumped more than $355 billion in net new inflows into BlackRock's products.
A divestment push has faltered in Kentucky, where pension officials said moving billions of dollars from BlackRock and other ESG firms would violate their fiduciary duty to maximize returns.
In North Carolina, Republican state Treasurer Dale Folwell publicly criticized BlackRock while leaving $18.4 billion with the money manager. Folwell said he negotiated lower fees and is now voting on state property in a proxy vote rather than allowing BlackRock to do so. Folwell said he couldn't find a lower-cost asset manager, even as he called for Larry Fink's ouster as BlackRock CEO.
“There's only one fingerprint in this whole strategy, and you know how special that fingerprint is, and that fingerprint is his,” Folwell said.
In Texas, local companies have raised concerns about the state's “fair access” laws, which call on state and local governments to divest from financial companies deemed hostile to fossil fuels or firearms.
A study published last month by a nonprofit linked to the Texas Chamber of Commerce found that the laws could undermine the state's efforts to foster a pro-business climate and cost the state $37.1 million in lost tax revenue.
“In simple terms, when the government tries to impose values (regardless of their type) on companies, the market loses, and taxpayers bear the consequences,” the study said.
