West Virginia Treasury drops BlackRock on climate risk stance

West Virginia’s Board of Treasury Investments, which manages $8 billion in state operating funds, removed BlackRock money market funds from its portfolio, citing concerns about the firm’s focus on environmental, social and governance investments. The Treasury Board also cited BlackRock’s holdings in Chinese companies for its decision.

On Monday, hours before BlackRock CEO Larry Fink released his annual letter to CEOs, West Virginia State Treasurer Riley Moore broke the news.

“The decision was based on recent reports that BlackRock urged companies to adopt ‘net zero’ investment strategies that would hurt the coal, oil and natural gas industries, while increasing investment in Chinese companies. that subvert national interests and damage West Virginia’s manufacturing base and labor market,” the announcement read.

Although West Virginia’s investment with BlackRock is tiny – and low cost – compared to the giant’s $10 trillion under management, the decision highlights the potential political risk of CEOs like Fink taking on challenges like as the environment, social issues like income inequality and make decisions based on multiple stakeholders, not just investors in its stocks. Last year, in a huge move for an asset manager, Fink said “climate risk is investment risk”.

A BlackRock spokesperson declined to comment on the news. Fink’s letter addressed stakeholder capitalism as well as the asset manager’s focus on environmental, social and governance issues. Among other things, the letter covered the changing world of work, the explosion of new sources of capital, and an initiative to give customers more of a say in proxy voting. “We focus on sustainability not because we are environmentalists, but because we are capitalists and trustees for our customers,” he wrote.

Fink’s letter showed that he was also aware of politically-based criticism of company policies. Fink went on to write, “Stakeholder capitalism is not about politics. It is not a social or ideological program. It’s not “awakened”. It’s capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your business relies on to thrive.

As of December 31, the West Virginia Money Market Pool tenuous almost $1.25 million in the BlackRock Liquidity Indices, according to monthly state holdings reports.

Moore, the treasurer, said investing with BlackRock “goes against” his duty to ensure that taxpayers’ money is handled responsibly. He also said in a statement that he believed BlackRock’s decision to invest in China was “a bad strategy” because he believes the country has engaged in human rights abuses and played games. a role in “creating the global COVID-19 pandemic”. However, the results of a US intelligence investigation in 2021 found no evidence that the COVID-19 virus was weaponized.

Moore’s message echoes that of a recent ad campaign by a Washington, DC-based “anti-awakening” group called Consumers’ Research, which targeted BlackRock for these issues. This ad campaign claimed that BlackRock was “investing your money” in China and that the company’s ESG policies violated fiduciary duty laws. (It is false to say that BlackRock’s ESG policies violate fiduciary duty laws.)

West Virginia’s Board of Treasury Investments is one of the first public fund managers in the state to explicitly drop an asset manager for its ESG stance, though it may not be the last. In September 2021, a Texas law prohibiting state pension plans from investing in companies that boycott energy companies has gone into effect. So far, one fund, the Teacher Retirement System of Texas, has not needed to remove investments from its portfolio, according to the results of a regular year-end audit of compliance with these laws.

Even if TRS had, BlackRock probably wouldn’t be on the list of divested companies. According to Fink’s 2022 letter: “Divestment from entire sectors – or simply shifting carbon-intensive assets from public to private markets – will not take the world to net zero. And BlackRock does not pursue divestment from oil and gas companies as a policy.

Instead, he added, “We believe that the companies leading the transition present a vital investment opportunity for our clients and that directing capital to these phoenixes will be essential to achieving a clean world. zero”.

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