STUMP - Meep on public finance, pensions, mortality and more
STUMP - Death and Taxes
Political Risk and Public Pension Investments

Political Risk and Public Pension Investments

Remember that politicians aren't fiduciaries

In which I look at recent news where some politicians announce they’re dumping an asset manager for the public pensions over political concerns, note some comments on ESG in public pensions, and then point out that politicians aren’t fiduciaries for public pensions.

STUMP - Meep on public finance, pensions, mortality and more is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Links from the podcast

Chief Investment Officer: 10 Oct 2022: Louisiana Divests Nearly $800 Million from BlackRock to Protect Fossil Fuel Industry

Louisiana Treasurer John Schroder is divesting $794 million worth of state funds from BlackRock because the world’s largest asset manager’s “blatantly anti-fossil fuel policies would destroy Louisiana’s economy.”

The divestment is in response to BlackRock’s sustainable investing philosophy, and for the firm calling on other companies to embrace net zero investment strategies that would harm the fossil fuel industry, which Schroder notes is a “vital part” of Louisiana’s economy.

Schroder’s letter: dated 5 Oct 2022

Your blatantly anti-fossil fuel policies would destroy Louisiana’s economy.

Therefore, Louisiana Treasury will liquidate all BlackRock investments by the end of 2022. To date we have divested $560 million. We are strategically divesting over a period of time so state money is not lost to the detriment of our citizens. Once complete, this divestment will reflect $794 million no longer entangled in BlackRock money market funds, mutual funds or exchange-traded funds (ETFs) holdings.

This divestment is necessary to protect Louisiana from actions and policies that would actively seek to hamstring our fossil fuel sector. In my opinion, your support of ESG investing is inconsistent with the best economic interests and values of Louisiana. I cannot support an institution that would deny our state the benefit of one of its most robust assets. Simply put, we cannot be party to the crippling of our own economy.

In addition, according to my legal counsel, Environmental, Social and Governance (ESG) investing is contrary to Louisiana law on fiduciary duties, which requires a sole focus on financial returns for the beneficiaries of state funds. Focusing on ESG’s political and social goals or placing those goals above the duty to enhance investors’ returns is unacceptable under Louisiana law. A letter signed by 19 state attorneys general sent to you recently emphasized this same point.

So, supposedly Schroder is a fiduciary of the funds he is pulling from BlackRock.

That said, I note he is removing money from: money market funds (what? — is ESG in this?), mutual funds (fair enough), and ETFs (again, fair enough). Some of this is sounding somewhat weird to me. Money market funds?

closeup photo of eyeglasses
Photo by Kevin Ku on Unsplash

Larry Fink’s, CEO of BlackRock, 2021 Letter to CEOs:

BlackRock is a fiduciary to our clients, helping them invest for long-term goals. Most of the money we manage is for retirement – for individuals and pension beneficiaries like teachers, firefighters, doctors, businesspeople, and many others. It is their money we manage, not our own. The trust our clients place in us, and our role as the link between our clients and the companies they invest in, gives us a great responsibility to advocate on their behalf.

This is why I write to you each year, seeking to highlight issues that are pivotal to creating durable value – issues such as capital management, long-term strategy, purpose, and climate change. We have long believed that our clients, as shareholders in your company, will benefit if you can create enduring, sustainable value for all of your stakeholders.


I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives. It has reminded us how the biggest crises, whether medical or environmental, demand a global and ambitious response.

Larry Fink’s 2022 Letter to CEOs:

The financial security we seek to help our clients achieve is not created overnight. It is a long-term endeavor, and we take a long-term approach. That is why, for the past decade, I have written to you, as CEOs and Chairs of the companies our clients are invested in. I write these letters as a fiduciary for our clients who entrust us to manage their assets – to highlight the themes that I believe are vital to driving durable long-term returns and to helping them reach their goals.


Most stakeholders – from shareholders, to employees, to customers, to communities, and regulators – now expect companies to play a role in decarbonizing the global economy. Few things will impact capital allocation decisions – and thereby the long-term value of your company – more than how effectively you navigate the global energy transition in the years ahead.


Every company and every industry will be transformed by the transition to a net zero world. The question is, will you lead, or will you be led?

In a few short years, we have all watched innovators reimagine the auto industry. And today, every car manufacturer is racing toward an electric future. The auto industry, however, is merely on the leading edge – every sector will be transformed by new, sustainable technology.

Engineers and scientists are working around the clock on how to decarbonize cement, steel, and plastics; shipping, trucking, and aviation; agriculture, energy, and construction. I believe the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime. It will also leave behind the companies that don’t adapt, regardless of what industry they are in. And just as some companies risk being left behind, so do cities and countries that don’t plan for the future. They risk losing jobs, even as other places gain them. The decarbonization of the economy will be accompanied by enormous job creation for those that engage in the necessary long-term planning.


That is why we are pursuing an initiative to use technology to give more of our clients the option to have a say in how proxy votes are cast at companies their money is invested in. We now offer this option to certain institutional clients, including pension funds that support 60 million people. We are working to expand that universe.

We are committed to a future where every investor – even individual investors – can have the option to participate in the proxy voting process if they choose.

4 Aug 2022 Letter from 19 Republican state attorneys general:

BlackRock’s Chief Client Officer, Mark McCombe, recently wrote a letter to many of our states describing BlackRock’s position on energy investments with respect to our pension funds. Mr. McCombe’s letter contains many statements that appear to conflict with BlackRock’s previous public statements and commitments.

Based on the facts currently available to us, BlackRock appears to use the hard-earned money of our states’ citizens to circumvent the best possible return on investment, as well as their vote. BlackRock’s past public commitments indicate that it has used citizens’ assets to pressure companies to comply with international agreements such as the Paris Agreement that force the phase-out of fossil fuels, increase energy prices, drive inflation, and weaken the national security of the United States. These agreements have never been ratified by the United States Senate. The Senators elected by the citizens of this country determine which international agreements have the force of law, not BlackRock. We have several additional concerns that fall under our jurisdictional authority as attorneys general.

7 Sept 2022 response from BlackRock:

We are writing in response to the letter you sent to BlackRock, Inc. (“BlackRock”) on August 4, 2022. We welcome the opportunity to address the questions you raised and clarify misconceptions about BlackRock.


Governments representing over 90% of global GDP have committed to move to net-zero in the coming decades.8 We believe investors and companies that take a forward-looking position with respect to climate risk and its implications for the energy transition will generate better long-term financial outcomes. These opportunities cut across the political spectrum; notably, as Bloomberg recently reported, Republican districts are well ahead of their Democratic counterparts in advancing clean-energy projects and deploying clean-energy technology.9

Climate risk and the economic opportunities from the energy transition have become a top concern for many of our clients. BlackRock clients representing more than $3.3 trillion in assets have committed to support that transition through investments in their portfolios.10 Our role is to offer them data and analytics, investment insights, and thought leadership about the impacts of the energy transition on their portfolios.

STUMP - Meep on public finance, pensions, mortality and more is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

STUMP - Meep on public finance, pensions, mortality and more
STUMP - Death and Taxes
Meep (Mary Pat Campbell) talks about mortality trends and/or public finance issues, usually with a connection to current events.