State Investment Council Considers Transfer of Business from BlackRock as Investment Advisor
LINCOLN — The state agency, which manages $40 billion in government pension and trust funds, on Thursday proposed considering a business transition from its chief investment adviser, BlackRock, in part because of corporate announcements of investment in environmental, social and governance (ESG) ).
The eight-member Nebraska Investment Board heard presentations not only from BlackRock, the world’s largest investment manager and longtime chief adviser to Nebraska, but also from one of its competitors, the Vanguard Group.
The Board also received information from Institutional Shareholder Services Inc., a company that advises investors on how to vote on corporate shareholder decisions.
ISS was recently criticized by Nebraska Attorney General Mike Hilgers, who accused the firm of possibly violating its responsibilities by setting “zero emissions targets” above financial returns.
Conservatives Attack ESG Investments
This is all because some investment firms, most notably BlackRock, have come under fire for allegedly prioritizing fossil fuel phasing out in favor of green energy and emissions-focused investment firms.
Anyone reading this letter should be thinking, gosh, it sounds like they are promoting value instead of trying to create investment value. And that’s what we don’t want.
– Gail Werner-Robertson on Blackrock CEO’s letter regarding investing in ESG.
Some call the attacks “political theater” and say it would be a mistake to ignore climate risks and the politics of business diversity when investing.
But some conservative states, such as Florida, Texas, and West Virginia, have made the decision to ban ESG consideration when investing public funds. At least two bills pending in the Nebraska Legislature impose similar restrictions.
In addition, Nebraska State Treasurer John Murante, a non-voting member of the Investment Board, suggested that BlackRock was promoting a “leftist agenda”. And Hilgers, who took office in January, took over the baton from former Attorney General Doug Peterson in criticizing the ESG review.
On Thursday, BlackRock representatives rejected a claim by the Texas Comptroller that the company was “boycotting” energy companies.
BlackRock’s Mark McComb told the Investment Board that his firm is a leading investor in the energy sector and has just increased its investment by $300 billion.
Shift in investment in the energy sector
McComb said there’s been a significant shift in energy investment in recent years towards things like electric vehicles, carbon sequestration and solar, and the company needs to “think about where the puck is going.”
He also said the BlackRock CEO’s 2020 letter urging companies to adopt “sustainable strategies” in the face of climate change was misinterpreted.
“We don’t have a political agenda,” McComb said. “We do one thing and one thing only to get results for our clients.”
BlackRock said the firm recently began offering clients a “menu” of options over the past year to better reflect their point of view when voting by proxy on corporate shareholder decisions.
No political agenda
McComb said the company’s sole purpose was to vote to reflect the wishes of its customers.
Vanguard and ISS representatives said their companies are also working to better reflect the values and views of their customers when voting by proxy.
After the meeting, Gail Werner-Robertson, an Omaha businesswoman who chairs the Investment Council, said the board plans to do more research before making any changes to the state’s investment management.
She said no decisions would be made until the end of the year, but signaled changes were being considered to give the Board more control over its investments.
“We want to choose a supplier that will help us do this in the best possible way,” Werner-Robertson said, “and therefore we have no one else who can diminish what we are doing for shareholders.”
Sounds like “value push”
She said that another consideration in the transfer of business from BlackRock was whether the state was concentrating too much of its business in one firm.
Werner-Robinson said it “sounds like” BlackRock is putting ESG ahead of financial considerations in a 2020 letter from company CEO Larry Fink.
“Anyone reading this letter should think, damn it, it sounds like they are promoting value instead of trying to create investment value,” she said. And that’s what we don’t want.
Murante, the former head of the national government treasurer group that has criticized ESG, did not comment during the meeting but later said the Investment Board “seems to be listening” to his concerns.
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