State Treasurer Dale R. Folwell, CPA, has publicly called for the resignation or removal of BlackRock CEO Larry Fink, citing a significant loss of confidence in Fink’s leadership. This demand stems from concerns over BlackRock’s increasing emphasis on Environmental, Social, and Corporate Governance (ESG) initiatives, which Folwell argues detract from the firm’s primary fiduciary duty.
BlackRock, under Fink’s guidance, has become a global leader in pushing for a transition to carbon “net-zero” by 2050. As the world’s largest asset manager, overseeing approximately $9.5 trillion, BlackRock’s influence is substantial. The firm has actively used its market power, collaborating with groups like the Glasgow Financial Alliance for Net Zero and Climate Action 100+, to encourage companies worldwide to adopt net-zero targets.
Treasurer Folwell, responsible for managing public investments for North Carolina, expressed his concerns directly. “As keeper of the public purse my duty is to manage our investments to ensure that the best interests of those that teach, protect and serve, as well as of our retirees, are always paramount,” Folwell stated. The North Carolina Retirement Systems (NCRS) has a significant investment portfolio with BlackRock, including approximately $14 billion in various funds and an additional $55 million passively invested in BlackRock stock and bonds.
Folwell argues that Fink’s focus on ESG is misaligned with fiduciary responsibilities. “Unfortunately, Mr. Fink’s political agenda has gotten in the way of his same fiduciary duty. A focus on ESG is not a focus on returns, and potentially could force us to violate our own fiduciary duty of loyalty,” Folwell elaborated. He further warned that the continued emphasis on ESG could lead to negative financial consequences for states and local governments. “Ultimately, Mr. Fink’s continued ideological pressure could result in using ESG scores against states and local governments, lowering their credit ratings and thus driving up their cost of borrowing at taxpayers’ expense. This not only concerns me as the state treasurer and ‘keeper of the public purse,’ but as Chair of the N.C. State Banking Commission and the Local Government Commission,” he added.
The core of the issue lies in the perception that BlackRock, under its BlackRock CEO, is prioritizing a global warming agenda over maximizing financial returns for its clients. Folwell points to instances where BlackRock has utilized its proxy voting authority to push companies towards “net zero” goals, actions that he believes conflict with fiduciary responsibilities.
A key example cited is BlackRock’s 2020 proxy vote against management-supported board members at ExxonMobil, a leading oil company. This vote was cast due to what BlackRock deemed “insignificant progress” towards ESG goals, pushing ExxonMobil away from fossil fuels and towards renewable energy. Ironically, in the 12 months following this event, ExxonMobil’s stock surged by 60% due to increased oil demand and rising prices. Currently, a significant portion of the top-performing companies in the S&P 500 are in the fossil fuel industry or related sectors, highlighting the continued economic importance of these industries.
Adding another layer to the ESG debate, Tesla, Inc., the world’s largest electric car company, was removed from the S&P 500 ESG Index, while ExxonMobil remained and received a high ESG rating from S&P Global. This decision led Tesla CEO Elon Musk to criticize ESG as “wacktivism.” This apparent contradiction raises questions about the consistency and practical application of ESG ratings and their impact on investment decisions.
In response to growing criticism, BlackRock introduced a proxy voting system called Voting Choice last year. This program allows investors in certain pooled vehicles to exercise some control over their voting rights. Treasurer Folwell acknowledged this development, noting that NCRS has signed an agreement to vote its shares managed by BlackRock.
However, Folwell maintains that this proxy voting program does not address the fundamental issue. “The existence of the proxy voting program does not mitigate the need for a new direction at BlackRock,” he asserted. He emphasized that his office prioritizes financial returns above political agendas. “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. 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.”
Folwell underscored the continued importance of fossil fuels in the global economy. “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,” he concluded, reiterating his call for a leadership change at BlackRock, implying the resignation or removal of the current BlackRock CEO, Larry Fink.
Treasurer Folwell further aligned himself with the views of Charlie Munger, vice chairman of Berkshire Hathaway Inc., who has criticized the influence of “emperors” wielding voting shares in index funds to push social agendas. Folwell also expressed support for laws like Texas’ “Eliminate Political Boycotts Act,” which mandates divestment from firms that “boycott” the state’s fossil fuel industry. BlackRock is among the companies identified by the Texas Comptroller as potentially impacted by this law.
The North Carolina Retirement Systems, the ninth-largest public pension fund in the U.S., is considered among the best-funded in the nation, providing retirement benefits for over 1 million North Carolinians. Its current valuation stands at $111.4 billion, highlighting the significant financial responsibility entrusted to Treasurer Folwell and his concerns regarding the direction of BlackRock under its current CEO.
For further information, visit www.nctreasurer.com.
Letter from Treasurer Dale R. Folwell, CPA, to BlackRock Board of Directors – Dec. 9, 2022
