Perhaps the tide is turning.
Those who portend to make a living off of investing your money will actually perform financial due diligence instead of a woke political pirouettes. Don’t get me wrong, there are plenty of salivating die-hard eco-religious souls that don’t care if their money goes down a hole, as long as the hole represents the right cause. Sound investment strategy.
However, for those who actually reside on planet earth and have a modicum of sense, there is actually a mandated fiduciary duty not to pyramid your funds into schemes and other such nonsense. This is particularly true for those who manage public funds like state and municipal pensions.
The hard-working people of say, Louisiana, probably don’t care that a windmill in Iowa may save the world power and energy one day. They just want to be able to keep up with inflation and protect against a possible recession. One of the buy-side culprits of this movement is the behemoth BlackRock fund.
Louisiana has removed $560 million to date and will pull out a total of $794 million by year’s end.
According to Louisiana State Treasurer John Schroder, “I refuse to spend a penny of Treasury funds with a company that will take food off tables, money out of pockets, and jobs away from hardworking Louisianans.”
The demand for sustainable funds wanes as the war in Ukraine puts the focus back on oil and gas.
States with an interest in oil and gas see BlackRock and other funds that go down this ESG road as an attack on fossil fuels and conventional energy, which makes up a large percentage of the revenue of such states.
In a recent letter to BlackRock CEO Larry Fink, some nineteen states expressed their concerns with how the fund was committed to a net-zero policy across its investable assets. The states included Texas, West Virginia, Louisiana, Montana, Oklahoma, Idaho, and Ohio, among others.
As one might imagine, the world’s largest money manager is mounting a new defensive strategy amid fierce scrutiny by Republicans and accusations that Larry Fink, is pandering to “woke” climate and social values.
If you take a look at BlackRock’s website, they’ll tell you that, “Sustainable investing is the practice of analyzing a company’s environmental, social and governance (ESG) risks, as well as assessing its opportunities and progress, using ESG data and fundamental insights, to inform the allocation of capital.”
That doesn’t give me a warm and fuzzy feeling if I’m the Treasurer of South Carolina, who by the way, plans to pull $200 million from BlackRock by the end of the year. Fink is expertly skilled in double-speak, saying one thing to green constituents and another to the rest. He has been pushing for companies to cut emissions. In the event of non-compliance or weak compliance, he has threatened to drop them from the firm’s actively-managed funds.
It might be only a matter of time before the SEC gets involved.
The letter to Fink was also sent to the SEC, whereby it asks the agency to look into BlackRock’s ties to China and whether or not it was prioritizing its fiduciary responsibility to investors.
The letter highlighted that the investing giant invests in and does business with Chinese companies that often flout environmental concerns even as it pushes for US companies to embrace net-zero carb emissions. Despite the planned withdrawals, BlackRock’s assets under management have actually surged $1 trillion since 2020.
Citing Morningstar analyst Greggory Warren, “The BlackRock funds the Republicans had dropped were often cash-like products with small fees. The Republicans’ ESG backlash was “political posturing” ahead of elections in November.”
Europe again is the canary in the coal mine, as the Russian/Ukrainian war has put its leftist ESG agenda on hold. Even eco-friendly radicals like to have a warm place to live in the winter.
According to Laith Khalaf, head of investment analysis at AJ Bell Investments, “Continuing use of coal power, which was unthinkable only a few weeks ago, is now on the agenda across Europe, and the rising price of oil and gas might have persuaded some ESG investors who were in it for the profits, that there may yet be some life left in traditional energy sectors.”