Another state government has decided to withdraw funds from under the stewardship of BlackRock, the world’s largest asset manager.
The blow comes as BlackRock eagerly awaits the SEC’s decision on a spot Bitcoin exchange-traded fund (ETF). The asset manager will have to wait a little longer, though. On August 31, the regulator extended its review period for multiple spot Bitcoin ETF applications until October.
Investment Council Will Move Some Funds to Northern Trust
On Thursday, September 7, the Nebraska Investment Council voted unanimously, 5-0, to move some of its funds from BlackRock’s management, allegedly because of concerns over BlackRock’s focus on environmental, social, and governance (ESG) standards.
Half of the state’s $7.3 billion in “passive” investments will transfer to the custody of Northern Trust, a financial services firm based in Chicago. The other half will remain with financial behemoth BlackRock.
However, BlackRock will still manage the state’s $40 billion in “active” investments. They include assets designated for state pension funds and college saving plans.
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Gail Werner-Robinson, the chair of the Investment Council, told the Nebraska Examiner that the body had concerns about BlackRock’s Environmental, Social, and Governance (ESG) criteria.
Furthermore, the state body also wanted “insurance” against any issues that may arise with BlackRock in the future, as previously, the New York-based firm had managed all of the state’s investments.
However, there appears to be disagreement over the change. Contrary to Werner-Robinson’s claims, Michael Walden-Newman, the state investment officer, said the transition was unrelated to ESG. He claims the switch came down to Northern Trust’s superior services.
Political Pressure Piles up on ESG Standards
Nebraska is not the first state to put clear blue water between BlackRock and its taxpayer dollars. Politicians in Kentucky, Texas, Florida, West Virginia, and North Carolina have raised concerns about the asset manager’s preoccupation with ESG.
Political pressure has been piling on in Washington, too. On July 18, Rep. Bill Huizenga (R-MI), Chairman of the Oversight and Investigations Subcommittee on House Financial Services, sent letters to top asset managers, including BlackRock, asking how they balance ESG initiatives with their duty to maximize investor returns.
Likely in response to the incoming fire, BlackRock has softened its stance in recent months. Not on governance, but on the first two parts, environmental and social policy.
The asset manager endorsed just 7% of about 400 environmental and social shareholder proposals in its recent annual report. This marks a steep drop from 22% and 47% in previous cycles.
BlackRock was also coming in for criticism for its investment links to China. According to a House committee, BlackRock has funneled over $429 million to Chinese firms across five funds, thereby intensifying global security threats.
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