TAMPA, Fla. (WFLA) — Florida Chief Financial Officer Jimmy Patronis announced the state treasury will be divesting $2 billion in assets that are currently managed by BlackRock, Inc., an investment funds manager, due to recent statements regarding “stakeholder capitalism” by BlackRock CEO Larry Fink.
According to the CFO’s announcement, that means Florida will “immediately” freeze about $1.43 billion of long-term securities and remove BlackRock as manager of roughly $600 million in short-term overnight investments. The funds are all taxpayer dollars invested for the Florida Treasury Investment Pool.
“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,” Patronis said in his statement, in part.
“BlackRock CEO Larry Fink is on a campaign to change the world. In an open letter to CEOs, he’s championed ‘stakeholder capitalism’ and believes that ‘capitalism has the power to shape society,’” Patronis continued. “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 went further, saying that using Florida’s money to “fund BlackRock’s social-engineering project” isn’t something Florida chose to participate in, and that the divestment was due to the company saying that “they’ve got other goals than producing returns.”
Fink’s letter to other company CEOs said that access to capital and equity is not a right but a privilege, telling BlackRock clients that financial security is not something “created overnight,” but instead “is a long-term endeavor.” He said for the past 10 years, he’s written letters to clients and companies as a fiduciary for their clients and to “highlight the themes that I believe are vital to driving durable long-term returns and to helping them reach their goals.”
Fink said that his idea of stakeholder capitalism is not political, nor part of a sociological or ideological agenda, specifically, he said “it is not ‘woke.’ It is capitalism, driven by mutually beneficial relationships” between companies, their employees, customers, suppliers, and communities.
The open letter may have been described as not being ideological or “woke” by Fink, but Patronis disagreed.
Building on the philosophy behind Fink’s letter, and recent adjustments to Florida investment policy by state leaders, Patronis said that while Fink was correct, and access to capital was a privilege, not a right, but that as CFO, he would not use state funds to participate in BlackRock’s “social-engineering project” which uses environmental, social governance to strategize investment.
“As Florida’s CFO I agree wholeheartedly, so we’ll be taking Larry up on his offer. There’s no lack of companies who will invest on our behalf,” Patronis said in his statement. “So the Florida Treasury will be taking its business elsewhere.”
The shift in investment strategy for Florida has shifted in recent months, with officials announcing they would no longer provide “woke businesses” with state dollars or assets, with Gov. Ron DeSantis saying using pension and retirement funds from Florida to invest in companies with a social or political agenda would not be allowed. DeSantis made the announcement at a Tampa news conference in July.
“It raises the question of who governs society,” DeSantis asked at the time. “Do we govern ourselves through our Constitution or through our elections, or do we have these masters of the universe occupying these commanding heights of society, are they able to use their economic power to impose policies on the country that they could not do so at the ballot box?”
Detailing the new policies for Florida’s investment funds, DeSantis said the State Board of Administration Fund Manager would only invest state money in companies that are not “using political factors when investing” and that instead, SBA fund managers would only consider how to maximize returns on investment for Florida retirees.
At a follow-up event at a Pasco County school in August, DeSantis reiterated that plan, saying that Florida was the state “where woke goes to die,” saying that incorrect ideologies made people “shift” rather than admit when they were wrong, and that Florida would fight “woke corporations” and ideology in education on behalf of state residents.
Responding to WFLA.com about the divestment announcement, BlackRock provided the following response.
As a fiduciary, everything we do is with the sole goal of driving returns for our clients. We are surprised by the Florida CFO’s decision given the strong returns BlackRock has delivered to Florida taxpayers over the last five years. Neither the CFO nor his staff have raised any performance concerns. We are disturbed by the emerging trend of political initiatives like this that sacrifice access to high-quality investments and thereby jeopardize returns, which will ultimately hurt Florida’s citizens. Fiduciaries should always value performance over politics.
Today’s actions do not reflect the totality of our clients’ investment decisions. For example, US clients awarded BlackRock $84 billion of long-term net inflows in the third quarter alone and $275 billion over the last twelve months.
BlackRock is proud to have invested more than $65 billion into Florida’s economy on behalf of our clients. We also look forward to continuing to invest in and serve our clients in Florida.Statement from BlackRock, Inc. regarding divestment announcement
Since Gov. Ron DeSantis first announced new policies on investment regarding “woke corporations,” this may be the first example of divestment over ESG policies. WFLA.com reached out to the CFO’s office to confirm if this is the first time the policy is being implemented, but were redirected to the earlier announcement provided to media outlets.