Grygo is the chief content officer for FTF & FTF News.
Another anti-ESG push from the right is emerging and this time it’s taking aim at what is arguably the world’s largest asset manager.
The attorney general for the Grand Canyon state Mark Brnovich earlier this month created “a coalition of 19 states that sent a letter to BlackRock Inc., calling out its practices of putting leftist politics above investors’ interests and returns.”
This is not the first political spat to emerge over ESG and public pension investment funds.
In April, FTF News reported upon a backlash against environmental, social, and governance (ESG) considerations organized by the American Legislative Exchange Council (ALEC), a group of state legislators that proposed a new framework for state pensions.
The framework is intended to strengthen “fiduciary rules to protect pensioners from politically driven investment strategies. These strategies reduce investment returns over the long term which leads to underfunding in state pension plans across the country,” according to ALEC officials.
Mark Brnovich
The new Arizona coalition is also concerned that left-of-center ESG considerations will lead to poor investment portfolio decisions for public pension investments. The Arizona coalition argues that, if left unchallenged, this strategy would rob retired state and city workforce pensioners of their hard-earned money. It would also be bad news for those employees paying into public pension funds now, according to the coaltion.
“It appears that anyone purchasing a BlackRock fund is forced to support ESG whether they like it or not. General Brnovich’s letter demands that BlackRock clarify its mixed messages and come clean on whether it actually values our states’ most valuable stakeholders — our current and future retirees,” according to the Arizona AG’s announcement.
The attorneys general of Nebraska, Alabama, Arkansas, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Ohio, Oklahoma, South Carolina, Texas, Utah, and West Virginia are supporting Brnovich.
“A fiduciary responsibility requires putting your client’s best interests ahead of any political agendas,” Brnovich says in a prepared statement. “Helping to ensure financially secure retirements must be the first priority of this asset manager.”
In the letter, the Arizona AG notes that Mark McCombe, chief client officer for BlackRock, corresponded with “many of our states describing BlackRock’s position on energy investments with respect to our pension funds. Mr. McCombe’s letter contains many statements that appear to conflict with BlackRock’s previous public statements and commitments.
“Based on the facts currently available to us, BlackRock appears to use the hard-earned money of our states’ citizens to circumvent the best possible return on investment, as well as their vote,” according to the letter.
“BlackRock’s past public commitments indicate that it has used citizens’ assets to pressure companies to comply with international agreements such as the Paris Agreement that force the phase-out of fossil fuels, increase energy prices, drive inflation, and weaken the national security of the United States,” according to the letter.
Brnovich and company argue that the international agreements about fossil fuels have “never been ratified by the United States Senate” which determines whether international agreements “have the force of law, not BlackRock.”
The eight-page letter goes into great detail about energy investments, climate change, the movement toward sustainable energy sources, and away from traditional energy providers, and ultimately argues that “BlackRock’s actions on a variety of governance objectives may violate multiple state laws.”
The letter also has a call to action.
“Our states will not idly stand for our pensioners’ retirements to be sacrificed for BlackRock’s climate agenda. The time has come for BlackRock to come clean on whether it actually values our states’ most valuable stakeholders, our current and future retirees, or risk losses even more significant than those caused by BlackRock’s quixotic climate agenda. Please respond by Friday, August 19, 2022,” according to the letter.
To quote Yosemite Sam, “Yeah, them’s fighting words!”
FTF News reached out to BlackRock to get its side of the story but there was no response by deadline.
Given how volatile politics in the U.S. is right now, it is impossible to predict how these ESG battles will turn out. There is every chance that they could escalate into epic struggles over where pension funds are ultimately invested. There may even be conflicts between pensioners and those firms that manage their funds. I also don’t really see how either side can achieve a compromise.
So, it seems that now would be the best time for the recipients of and the current investors in public pension funds to join the discussion and let their voices be heard. That may be the first step toward clarity.
After all, it’s their money.
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