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Indiana State Treasurer Daniel Elliott has placed BlackRock Inc. on a watchlist after finding the investment firm made an environmental, social, and governance, or ESG, commitment, he said in a Friday news release.
New York City-based BlackRock is the world’s largest asset manager and is a leading provider of investment, advisory and risk-management services. The company is the first to be placed on the watchlist, and the treasurer’s office is examining others.
The Indiana Public Retirement System and its board can take further action, which could mean divesting BlackRock from the state’s retirement investment portfolio.
Indiana passed a law in 2023 directing the IPRS board to refrain from making investments with the purpose of “influencing any social or environmental policy or attempting to influence the governance of any corporation for nonfinancial purposes.”
“The General Assembly tasked me with safeguarding Indiana pensioner’s assets from non-fiduciary actions,” Elliott said in the release. “Today we have begun the process of reevaluating BlackRock’s role within our pension and retirement system.”
The office listed several factors contributing to its classification, including a company disclosure noting ESG engagement, the use of third parties for ESG data and its membership in a net-zero emissions consortium.
State Comptroller Elise Nieshalla, who serves on the IPRS board, said the board was now required “to consider other fund managers not engaged in prioritizing ESG factors that are comparable in financial performance to ensure the Board’s fiduciary duty to beneficiaries. The Board has 180 days to fulfill this duty.”
BlackRock’s actions “promoting ESG investing” could damage the company’s reputation and client base that “prioritizes risky ESG engagement over its fiduciary duty to its clients,” the treasurer’s office said.
Since 2018, the firm has incorporated the consideration of ESG into its investment practices, which it says is part of its risk assessment to improve returns for its clients.
“We shouldn’t accept actions that put Hoosier retirees at risk,” Elliott said in the release. “ESG commitments hurt investments when employed by financial institutions. We must protect our public servants from having their hard-earned savings affected by ESG decisions made by large corporations such as BlackRock.”
Through a spokesperson, BlackRock said it disagreed with Elliott’s assessment.
“Contrary to the Treasurer’s assertion, BlackRock has been singularly focused on delivering performance for INPRS, consistent with their objectives,” the firm said. “We take direction from our clients, as our business is grounded in our fiduciary obligation to provide our clients with choice. On behalf of our clients, BlackRock has invested approximately $95 billion in Indiana, and we are helping more than 415,000 Indiana residents retire with dignity. We are proud of our contribution and remain committed to Indiana.”
Pension fund managers including BlackRock, State Street and Vanguard have come under fire from Republicans at the state and national level for practicing ESG investing. ESG funds have exploded in popularity in recent years, partly in response to a desire from investors to put their money toward what are perceived as noble causes.
The law also asks that a comparable, anti-ESG replacement fills the gap of a divested company.
Under the law’s discretion, the IPRS has also been working to pull out from Chinese investments as well as creating a framework to handle potential ESG divestments.
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This is genuinely the dumbest thing I’ve heard today.
What, does Indiana State Treasurer Daniel Elliott want, the entire pension fund invested in Oil and Gas Futures or something?
☝️ I mean if you want to forgo the world’s largest asset manager then you get what you deserve… So dumb. If they end up divesting, my heart goes out to the employees of that retirement system. Maybe they’ll get some to unretire because they’ll have to work?
Exactly. Indiana is embarrassing once again.
GM – problem is the benefits are fixed, so any under-performance will be borne by the taxpayers.
More heavy-handed governance by the extremists who have taken over the Republican Party.
Good to see a set of eyes placed on the ESG boondoggle. These need to be watched closely.
Black Rock manages $9T in assets. I think they know what they’re doing.
LS +1
LS but do you know what they are doing, I will answer that for you, NO!
Time will tell but isn’t it wise to be wary or careful of those who sometimes have other motives, other than what is best for their client’s best interests? I think they owe that to the public and I support our State Treasurer in staying on top of things like this. What is the harm in being placed on a “watchlist” anyway?
The state of Indiana is saying we are going to walk away from the fund managers that produce the best returns because we don’t like the choices that they make in getting them.
There was already a law directing the state to invest based on the returns. If making ESG commitments meant BlackRock would produce lessor returns, Indiana would have already left.
This, as mentioned by others, is simply foolishness to satisfy people who aren’t informed.
The harm of the watchlist is it will likely lead to the assets being moved to another asset manager, even if the returns realized by Blackrock are superior to those of other asset managers. This law, and its counterpart in other states, ignores the performance of the asset manager and focuses slowly on a social/political issue: Republicans and the WCWs are afraid of people looking for a level playing field. If the new asset manager that will almost certainly be retained does not perform as well as Blackrock, then the trustees of the state plan will have violated their fiduciary duties. The MAGAtts will have gotten their ounce of flesh from Blackrock, at the expense of the beneficiaries. And that is just wrong.
Given Indiana’s state government propensity for taking action that is aligned with Biblical foundations, it should come as no surprise the state is about to make a colossal fiduciary mistake.
“Cutting off your nose to spite your face” has its origins in the Bible (Jeremiah 44: 13-16), which warns against overreacting to a perceived problem by turning to a solution that ends up being more destructive than the problem itself.
Often such reactions come from fear or anger. Now Indiana’s fear is driving it to react with self-destructive behavior.
Shooting ourselves in the foot – big time.
Show me the money. There is no reporting here about the annual returns for any if these fund families. What is here is a lot of chatter along political thought processes. And yes, if oil and gas have the greatest returns, that’s where the money should be for State employees. Of course, everyone can put your individual funds wherever you want.
If you don’t understand what Black Rock and Larry Fink are trying to do, then you should do some research. You may have to dig a little deeper than you MSM to get to the truth.
9 trillion in assets is down from almost 11, this is not an accident!