On December 1, 2022, in a press release full of statements critical of the investment firm BlackRock and its CEO, Larry Fink, Jimmy Patronis, the Chief Financial Officer of Florida, announced that the Florida Treasury would begin divesting $2 billion of Florida state assets currently under management by BlackRock. The statement makes it clear that the Florida official is making the move because of his opposition to the investment firm’s activist positions, especially with respect to ESG issues. This development is the latest step in the process of the increasing politicization of ESG , a pattern that puts companies into the cross-fire as they contend with competing ESG expectations. The Florida CFO’s press December 1, 2022 press release can be found here.


The CFO’s statement follows several months after Florida Governor Ron DeSantis, along with his fellow trustees on Florida’s State Board of Administration, passed a resolution directing the state’s fund managers to invest state funds “in a manner that prioritizes the highest return on investment for Florida’s taxpayers and retirees without considering the ideological agenda of the environmental, social, and corporate governance (ESG) movement.” The statement also follows the move by DeSantis to introduce proposed legislation for the 2023 Florida Legislative Session that would amend Florida’s Deceptive and Unfair Trade Practices statute to prohibit discriminatory practices by large financial institutions based on ESG social credit score metrics.


In his December 1 statement, Patronis, the Florida CFO, explained his decision to divest the state’s investments from BlackRock by saying that in the current economic environment that “I need partners within the financial services industry who are as committed to the bottom line as we are – and I don’t trust BlackRock’s ability to deliver.” He noted further that BlackRock’s CEO, Larry Fink, is “on a campaign to change the world,” and that Fink has “championed ‘stakeholder capitalism.” Fink, Patronis said, “has leaned heavily into Environmental, Social, and Governance standards – known as ESG – to help police who should, and who should not gain access to capital.”


Patronis goes on to say “Whether stakeholder capitalism, or ESG standards, are being pushed by BlackRock for ideological reasons or to develop social credit ratings, the effect is to avoid dealing with the messiness of democracy. I think its undemocratic of major asset managers to use their power to influence social outcomes.” He added that “Using our cash … to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for.”


Patronis’s move to divest Florida’s BlackRock investments, and the other Florida governmental anti-ESG moves I noted above, are merely the latest manifestation of the phenomenon I have noted in previous posts – that is, the growing prevalence in certain quarters of an anti-ESG backlash. At the same time as activists, proxy advisors, and institutional investors are pushing companies and other financial market players to establish their ESG credentials, a different set of players are targeting the very same companies for ESG-oriented actions. And as if all of that were not enough, regulators and enforcement agencies have made it clear they are watching closely to make sure that companies’ ESG claims are backed up by substance. The upshot is that the ESG issue is becoming a complicated danger zone for companies, as they are at risk of getting caught in the cross-fire in an increasingly fraught environment surrounding ESG issues.


Larry Fink and the folks at BlackRock certainly don’t need me to come to their defense. I have no stake in whether the investment firm wants to try to enhance its public profile by wrapping itself up in self-proclaimed social responsibility virtues.  I also think it is perfectly legitimate for anyone, including Patronis, to say that don’t want to do business with BlackRock or with anybody else. As is often said, it is a free country.


Just the same, I do feel like there are some things to be noted about Patronis’s statement.


First, there is something important missing from Patronis’s statement. That is, even though he claims that Florida’s investment philosophy is focused exclusively on returns and not social issues or other extraneous matters, he doesn’t say anything at all in his press release about the returns on the state’s BlackRock investments. The absence of any mention of this topic is telling, in my view, because if the investment returns were inferior, you would have expected him to say that. It makes me think that, notwithstanding what Patronis has said, his divestment move is really about extraneous issues and not about returns. And by the way, if Patronis is making investment decisions based on extraneous issues and not based on investment returns, is he faithfully fulfilling the duties of his office?


And here’s the thing: if in fact the returns on Florida’s BlackRock investments really were inferior, you  don’t need to issue a press release about it. You just go ahead and make the change. The fact that Patronis viewed it as necessary to issue a press release for what is in reality a very routine move tells you that what is going on is not a mere action to try to maximize returns for Florida’s pensioners. Patronis issued the press release because it is very clear that Florida’s politicians have decided that reviling ESG is every bit as good of an applause line as castigating political opponents for being “woke” or whipping up audiences about “critical race theory.” Florida’s politicians think they have found political gold in bad-mouthing ESG and, to mix a metaphor, they are milking it for all they are worth.


For me, all of this is yet another manifestation of the problem that is at the root of the whole ESG issue – that is, the name “ESG” itself. “ESG” is meant to encompass a plethora of diverse and unrelated concepts, ideas, and concerns. The reality is that it is hard to say simply what “ESG” means; and not just “ESG,” but each of the three pillars, E, S, and G, are subject to the same definitional imprecision.  As I have previously noted, this definitional imprecision lends itself to a lot of sloppy thinking. It also makes it easy for grandstanding politicians to revile “ESG” – because, if it is everything all at once, what is it really? – as part of a vast “woke” conspiracy.


There are many problems with the imprecision of the ESG label, but the one that troubles me most is that what to me is the most important issue – climate change – gets subsumed and thus diminished by being hidden under a more generalized and unspecific categorical label.


I feel quite confident that Patronis has not read Elizabeth Kolbert’s November 28, 2022 article in The New Yorker entitled “Climate Change from A to Z” (here), but I recommend to all of you that you do read it. And then we can all start talking about climate change, because we must. Even if Florida’s politicians don’t want us to say ESG.


And Finally: Can I just say, we are talking about Florida? Is there any state in the country that is more vulnerable to the effects of climate change than Florida? Not only are the state’s coastal areas and islands vulnerable to rising sea levels, but the entire state is basically defenseless against extreme weather events and other possible consequences of global climate change. If there is any state that ought to be taking a thoughtful, considered approach to climate change, it is Florida. As part of that consideration, Florida – and, dare I say, its conservative politicians — might want to seriously consider whether financial markets might have an important role to play in finding possible solutions, or at least at a minimum undertaking the process of adaptation. Isn’t this what Florida’s politicians, and indeed politicians everywhere, ought to be talking about?