A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/usa-expat-pensions
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/global-investments-risks-0
https://expatpensionholland.nl/global-social-security-coverage
B] The Issue
The U.S. Indiana Public Retirement System (INPRS) voted to replace BlackRock as a manager in its portfolio, due to the investment giant’s alleged use of ESG investment policies and its engagement using “an ESG focused agenda.”
In a press release from Indiana State Treasurer Daniel Elliott, who also serves as a member of the INPRS Board of Trustees, Elliott said lauded the board’s decision to remove BlackRock, describing the firm as an “ESG violator.”
“Today, I and other INPRS board members voted to put Hoosier public servants first by rejecting BlackRock and woke corporate policies. As Treasurer of State, I led the charge against ESG and other non-fiduciary policies that harm workers force that put Hoosier public employee pensions at risk.”
C] GOP Crusade Against ESG
The announcement is only the latest in a growing series of in an ongoing anti-ESG movement by Republican politicians in the U.S., with BlackRock, as the largest global investment management company, and a leading voice in the investment community on climate and energy transition-related investment themes, often in the spotlight.
Most recently, BlackRock, alongside its peers Vanguard and State Street was the target of a multistate lawsuit, with Indiana as a participant, accusing the asset managers of using their positions in climate-focused investment initiatives to manipulate coal markets and drive up the cost of energy. BlackRock runs a passively managed international government bond index mandate for INPRS, with assets reportedly of nearly $1 billion.
The vote follows a report by Elliott in June 2024, which found that BlackRock “has engaged in an ESG commitment,” citing the asset managers participation in the Net Zero Asset Management initiative (NZAM), and finding that its “ESG commitment with respect to INPRS assets” is made “for a nonfinancial purpose in furtherance of social and ideological interests.”
BlackRock’s response, included in the report, noted that its mandate to run a benchmark index mandate for INPRS, “does not have an ESG component or screen.” Indiana passed a bill in 2023, prohibiting the use of ESG factors in investment decisions for the public retirement system. In its vote, the INPRS board affirmed that other comparable asset managers exist as an alternative to BlackRock to manage the Global Inflation-Linked Bonds portfolio, and mandated INPRS to select a new asset manager for the portfolio.
D] Negative Impact
Notably, BlackRock has scaled back its participation in sustainability-focused investment sector initiatives, including recently shifting its participation in engagement-focused coalition Climate Action 100+ to its international unit, citing a new strategy by CA100+ that would require signatories to commit to use client assets to pursue emissions reductions in portfolio companies.
In a letter to CA100+ published on the asset manager’s website, BlackRock said that “the money BlackRock manages is not our own—it belongs to our clients—and BlackRock is committed to providing clients around the world with choices to support their unique and varied investment objectives.” BlackRock’s website also carries a ‘2030 net zero statement,’ which states that “our role is to help them navigate investment risks and opportunities, not to engineer a specific decarbonization outcome in the real economy.”
In a statement released following the vote, State Comptroller Elise Nieshalla, also a member of the INPRS board, said: “I do commend BlackRock’s recent action to discontinue its affiliation with Climate Action 100+, but more needs to be done including ending its support of Net Zero and similar initiatives to demonstrate a refocused commitment of prioritizing beneficiaries over a political agenda.”
E] Finally
We understand that our GOP friends care about the optimal return on investment for retirement funds in an economy where rampant inflation puts a heavy burden on families.
But do we have to fight the environment? Does that work in the long term and does it result in a higher return? Do we not have just one planet and would it not be better to respect nature? If the force you might want to fight is superior to you, maybe best to avoid conflict. And thus embrace ESG.
Maybe enlightening to see what the EU’s insurance organization EIOPA says about ESG investments:
‘Better knowledge of environmental, including climate-related, and social sustainability risks enables policy-makers to take informed measures for reducing risks to consumers and to financial stability. By integrating the assessment of sustainability risks in prudential regulatory requirements and by providing dedicated analysis and guidance to undertakings, EIOPA aims to support the sectors’ management of sustainability risks.’
Source: https://www.eiopa.europa.eu/managing-sustainability-risks_en