NC treasurer seeks BlackRock CEO’s ouster because of firm’s environmental investments
North Carolina State Treasurer Dale Folwell called Friday for the CEO of the world’s largest investment manager to resign or be removed, citing loss of confidence because of the firm’s environmental, social and corporate governance initiatives and investments.
According to a Folwell news release, BlackRock, with Larry Fink at the helm, has “been at the forefront of using its market power to coerce the world’s companies to transition to carbon ‘net-zero’ by 2050” and “force the global warming agenda.”
Folwell, a Republican former state lawmaker, told The News & Observer that his office had been “under great duress over the months and years as we’ve been trying to navigate, fulfilling our duties, of getting the best value we can for the pensioners while trying to navigate how our shares are voted on our behalf.”
The North Carolina Retirement Systems has approximately “$14 billion invested through BlackRock in various active but mostly passive funds at the lowest possible investment fees, in addition to around $55 million passively invested in BlackRock stocks or bonds,” Folwell wrote.
The NCRS is a division of the Department of State Treasurer and administers pension benefits for state and local government employees. It distributes $590 million total funds monthly to members and beneficiaries and represents nearly 1 million active and retired North Carolinian public employees, according to this division’s website. Meanwhile, the Investment Management Division, serving as the state government investment arm of the treasurer’s office, manages pension funds, operating funds of the state, and other non-pension assets.
Folwell told The N&O that BlackRock investments represent about 5% of $250 billion or so worth of investments managed by the treasurer’s office, with the majority of these investments being in index funds. Index funds group stocks, bonds or other securities based on a benchmark, such as the Standard & Poor’s 500 Index.
Folwell also wrote that Fink’s “political agenda,” in particular his focus on environmental investment, had gotten in the way of his fiduciary duty, which could result in states and local governments having their credit scores lowered and the cost of borrowing being driven up at taxpayers’ expense. Folwell also said that BlackRock’s proxy voting authority was being used for these political purposes.
“We’ve asked for Mr. Fink to resign because of the enormous amount of energy that people like me are having to put into fighting these issues. When what ... I’m trying to do is just to make sure that our state is solvent,” Folwell told The N&O.
In a statement to The News & Observer, Christoper Van Es, director of corporate communications for BlackRock, said, “BlackRock has consistently delivered for our clients and shareholders, including the citizens of North Carolina. We value our relationship with the North Carolina Retirement Systems (NCRS) and are proud of the strong returns and significant value we deliver.”
‘No blue money or red money’
BlackRock’s proxy voting authority was being used for these political purposes, Folwell wrote. Shareholders can vote on various company issues. If BlackRock shareholders can’t attend an in-person meeting, BlackRock can vote their shares, with authorization, using a proxy voting system called Voting Choice.
“There is no blue money or red money at the treasurer’s office, only green. As the fiduciary for the North Carolina Retirement Systems, we seek not to be political, but mathematical,” Folwell said, “BlackRock needs to be totally focused on returns for their clients, not on the political effort to ‘transform’ the economy to their vision of carbon zero. Fossil fuels will be the engine that drives the world’s economy for the foreseeable future. The only way that I can see BlackRock refocusing on their fiduciary duty to their clients is for a change at the top.”
Folwell wrote that BlackRock used its clients’ proxy votes in 2020, “to vote against two management-supported board members of ExxonMobil because of ‘insignificant progress’ toward ESG goals” but that stock from ExxonMobil, the fourth-largest oil company in the world, had shot up in the 12 months since that election and that 19 or 20 companies in the S&P 500, a stock market index, are fossil fuel producers or connected to the industry.
Meanwhile, Folwell wrote, Tesla, Inc. was removed from the S&P 500 ESG Index, which tracks sustainability initiatives, while ExxonMobil remained highly ranked. Tesla CEO Elon Musk referred to this removal as “wacktivism” whose proponents are “wacktivists,” wrote Folwell.
BlackRock’s Van Es, in his statement, said, “Over the past year, BlackRock has been subject to campaigns suggesting we are either ‘too progressive’ or ‘too conservative’ in how we manage our clients’ money. We are neither. We are a fiduciary. We put our clients’ interests first and deliver the investment choices and performance they need. We will not let these campaigns sway us from delivering for our clients.”
Political positions
As treasurer, Folwell has not shied away from taking political positions. In June, he issued a report stating that many of the state hospitals made record profits from treating Medicare patients during the pandemic, which some hospital spokespersons’ said was inaccurate. Last year, Folwell opposed the coverage of transgender health procedures under the state’s health insurance policies, as previously reported by The News & Observer.
BlackRock has faced political scrutiny from both sides. On one end, over its environmental, social and governance investments and on the other, for taking too little action.
Most recently, on Dec. 5, Republican staffers in the United States House Banking Committee accused BlackRock, as well as State Street and Vanguard of using shareholder voting power to vote on “behalf of passive index fund investors,” to advance a “liberal political agenda.” Previously, in August, attorneys general from Arizona, Nebraska Kentucky, and 16 other states wrote a letter to Fink against BlackRock’s ESG investments.
Meanwhile, New York City’s comptroller, Brad Lander, wrote a letter in September to Fink stating that BlackRock’s investments did not align with its climate commitments. The letter said, “If we do not find a way to dramatically reduce carbon emissions in alignment with the Paris Agreement, the harm will not only be measured in lives lost and people displaced; it will also be measured in trillions of dollars lost in our collective portfolios.”
Asked what his concerns with the environmental investments were, considering the political split on this issue, Folwell said, “let me start with the fact that I’m not a politician. I’m a public servant. Because what politicians do is they take, what public servants do is they create, give.”
“Secondly, being the keeper of North Carolina’s public purse is like practicing yoga. You pay attention to your mat.”
Folwell said he expects his call and others to have an effect on BlackRock’s decisions.
“A cost asset management firm’s ... goal is to get money to manage and not lose. They’re not succeeding in that because of the billions and billions of dollars that are being pulled away from BlackRock,” he said.
This story was originally published December 9, 2022 at 3:00 PM.
