State treasurer enforces controversial ESG law for the first time, puts firm on watchlist
- Oops!Something went wrong.Please try again later.
Indiana Treasurer Daniel Elliott has placed investment firm BlackRock on a watchlist, enforcing a 2023 law banning Indiana pension funds from investing with firms that consider environmental, social and/or governmental factors in their investment decisions. It's the first time the state has flagged an asset manager since this controversial law was signed.
BlackRock manages multiple funds for INPRS, which administers Indiana’s public pension funds.
The company was put on the treasurer’s office’s watchlist because it made a commitment to environmentally and socially conscious investing as defined by a new Indiana law, according to a press release from Elliott's office. An Indiana law signed by the governor in May of 2023, requires Indiana’s public retirement pension to divest from investment firms that use ESG factors in their decision-making.
In a statement, Christopher Van Es, a spokesperson for BlackRock, defended the company's investment strategies, and said its leaders "remain committed to Indiana."
More statehouse news: Jennifer McCormick taps Terry Goodin as running mate, despite conservative voting history
"Contrary to the Treasurer’s assertion, BlackRock has been singularly focused on delivering performance for INPRS, consistent with their objectives," Van Es said in a statement. "We take direction from our clients, as our business is grounded in our fiduciary obligation to provide our clients with choice."
INPRS did not provide an answer to questions about the financial impact ceasing all ties to BlackRock would have on the state. According to the firm, BlackRock has invested approximately $95 billion in Indiana.
The law defines ESG commitment as “an action taken or a factor considered by a service provider: (1) with respect to or including the system’s assets; and (2) with the nonfinancial purpose to further social, political, or ideological interests based on evidence indicating the purpose.”
A 2022 BlackRock sustainability disclosure states the company’s integration of these goals throughout firm-wide investments.
“BlackRock incorporates financially material environmental, social, and/or governance data or information, alongside other information into firmwide processes with the objective of enhancing risk-adjusted returns," the form reads. "This applies regardless of whether a fund or strategy has a sustainable objective."
The treasurer’s office has been researching BlackRock and other companies since the beginning of the year, Chief of Staff and Legislative Counsel Abhi Reddy said. The office is looking into “every company that’s eligible." BlackRock just happens to be the first. The office doesn't know if or how many future companies may be put on the watchlist.
“We will see where it leads us," Reddy said. "We're not making prejudgments on anyone. They just happen to be first."
Looking at the bill as a whole, Reddy said both the General Assembly and Elliot were concerned about corporations "making non-financial decisions based on non-fiduciary reasons" with pension funds.
“We shouldn’t accept actions that put Hoosier retirees at risk,” Elliot said in a press release. “ESG commitments hurt investments when employed by financial institutions. We must protect our public servants from having their hard-earned savings affected by ESG decisions made by large corporations such as BlackRock.”
As of today, INPRS has officially been put on notice. It will have 180 days to meet with its board, of which Elliot is an ex-officio member, to see if there are other viable options that would provide the same services as BlackRock and perform comparably financially.
"If the board determines that there is not a comparable service provider to replace Blackrock," agency spokesperson Natalie Derrickson said in an emailed response, "the board shall continue contracting with Blackrock."
Contact IndyStar politics Pulliam fellow Nadia Scharf at nscharf@indystar.com or follow her on Twitter @nadiaascharf.
This article originally appeared on Indianapolis Star: Indiana treasurer puts BlackRock on watchlist due to 2023 ESG law
