By T. J. Muscaro
The asset management giant BlackRock continues to face growing scrutiny for investment decisions that have been criticized for pushing Environmental Social Governance (ESG) and funding the Chinese war machine—and Florida is reaping financial rewards for walking away from it.
Last week, BlackRock came under fire specifically for its investments in China.
The U.S. House’s China Select Committee found BlackRock—and another company MSCI—directed investments to more than 60 blacklisted Chinese companies.
In only five of its funds, Blackrock had more than $429 million in flagged Chinese firms.
Committee chairman Rep. Mike Gallagher (R-Wis.) and ranking member Rep. Raja Krishnamoorthi (D-Ill.) wrote: “It is unconscionable for any U.S. company to profit from investments that fuel the military advancement of America’s foremost foreign adversary and facilitate human rights abuses.”
Led by CEO Larry Fink, the firm manages approximately $9 trillion in assets but has reportedly been losing several Republican clients, including $2 billion worth of business with Florida’s State Treasury.
That decision, the Sunshine State reported, would not only allow it to outperform BlackRock’s expected earnings but also contribute to an all-around record for the highest earnings in a single fiscal year.
Florida’s Record Earnings
Florida finished the 2022–2023 fiscal year having generated more than $1 billion in revenue, Chief Financial Officer (CFO) Jimmy Patronis said on July 24.
Mr. Patronis said: “Florida’s investments are thriving thanks to strong fiscal stewardship and leadership in Tallahassee that is laser-focused on the bottom line and getting the best returns possible for taxpayers.”
He credits the Sunshine State’s financial success—in part to its current administration’s decision to move away from the Federal government and other states—which he said “are hell-bent on crippling their economies with burdensome regulations, high taxes, and ESG scores.”
ESG stands for Environmental Social Governance.
“Florida is open for business, and business is booming,” he declared. “This is an especially incredible accomplishment considering the reckless spending out of Washington that has caused unprecedented interest rate hikes in an attempt to fight record-breaking inflation.”
Florida’s Division of Treasury has earned nearly $4 billion since Mr. Patronis became CFO in 2017.
“Thank you to my dedicated team at the State Treasury for their hard work in prudently investing your state tax dollars so Florida families and businesses can thrive,” he said.
Better Off Without BlackRock
About $60 billion worth of taxpayer money is managed by Florida’s Department of Financial Services, and the Treasury “utilizes pooled investments for all funds not immediately needed for State of Florida business” and incorporates a combination of short-term, intermediate, and long-term investment strategies and assets.
But one investment move that the Treasury boasted about was its decision to leave Blackrock behind.
In December 2022, Florida divested $2 billion of its overall Long Duration Portfolio from the asset management company.
It redirected “$1.4 billion in former Blackrock-managed assets” in its long-duration portfolio to nine different fund managers ranked higher on a risk-adjustment basis, and the division managed short-term investment funds of around $600 million in-house.
In the six-month period between December 2022 and May 2023, the State Treasury’s portfolio “outperformed its benchmark.”
“As Florida’s Chief Financial Officer, it’s my responsibility to get the best returns possible for taxpayers,” Mr. Patronis said when announcing his decision.
“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.”
At that time, BlackRock CEO Larry Fink had recently doubled down on his belief that “capitalism has the power to shape society.”
Mr. Patronis said: “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.”
Mr Fink has said: “Behaviors are going to have to change, and this is one thing we’re asking companies. You have to force behaviors. And at BlackRock, we are forcing behaviors.”
“Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for,” said Mr. Patronis said in December 2022.
“It’s got nothing to do with maximizing returns and is the opposite of what an asset manager is paid to do.”
Six months later, BlackRock was accused of trying to push a Communist Chinese-esque social credit score on American industry.
And in July, House Republicans in Washington questioned whether or not the ESG policies being promoted by BlackRock and Vanguard could be violating Anti-Trust Laws.
Eva Fu contributed to this story.