Florida CFO Divests $2 Billion of State Assets in ESG Dispute With BlackRock

State Chief Financial Officer Jimmy Patronis announced Thursday that the Florida Treasury will begin divesting $2 billion worth of assets currently under management by BlackRock.

BlackRock managed $1.43 billion of Florida’s long duration portfolio, which includes investments such as corporate bonds, asset-backed securities and municipal bonds. Additionally, BlackRock managed $600 million of Florida funds in a short-term treasury fund, which invests in short-term and overnight investments.

Patronis cited efforts by BlackRock and its CEO, Larry Fink, to embrace environmental, social and governance investment principles as the reason Florida will pull the funds from the manager. In the wake of the announcement, the state will freeze the $1.43 billion in long-term securities at its custodial bank.

Patronis’ announcement follows a vote in August by the State Board of Administration of Florida trustees to ban ESG considerations from the state asset allocator’s investment decisions.

By the beginning of 2023, the state treasury intends to divest from BlackRock’s management of all short- and long-term investments and relocate investment responsibilities to other fund management entities, Patronis said.

“(Fink) has championed ‘stakeholder capitalism’ and believes that ‘capitalism has the power to shape society.’ To meet this end, the asset management company has leaned heavily into Environmental, Social, and Governance standards–known as ESG–to help police who should, and who should not gain access to capital,” Patronis said in a statement. “Whether stakeholder capitalism, or ESG standards, are being pushed by BlackRock for ideological reasons, or to develop social credit ratings, the effect is to avoid dealing with the messiness of democracy. I think it’s undemocratic of major asset managers to use their power to influence societal outcomes. … Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for.”

Patronis’ announcement follows Missouri treasurer Scott Fitzpatrick divesting $500 million, Utah treasurer Marlo Oaks pulling $100 million and Louisiana treasurer John Schroder divesting $794 million worth of state funds, all formerly managed by BlackRock. The treasurers argue that ESG investing is contrary to their fiduciary responsibilities, because they say it may compromise maximizing financial returns.

“It’s my responsibility to get the best returns possible for taxpayers,” Patronis said in the statement. “The more effective we are in investing dollars to generate a return, the more effective we’ll be in funding priorities like schools, hospitals and roads. As major banking institutions and economists predict a recession in the coming year, and as the Fed increases interest rates to combat the inflation crisis, I need partners within the financial services industry who are as committed to the bottom line as we are–and I don’t trust BlackRock’s ability to deliver. As Larry Fink stated to CEOs, ‘Access to capital is not a right. It is a privilege.’ As Florida’s CFO, I agree wholeheartedly, so we’ll be taking Larry up on his offer.”