US Democrats and Republicans clash over climate and returns as BlackRock warns of rising pension risks
Political pressure from both US Democrats and Republicans risks undermining the management of public pension funds, BlackRock Inc. said in a letter to US state officials.
S. Jane Moffat, the company’s head of state and local government affairs and public policy, said in the letter that “the politicization of pension fund management ultimately costs savers and retirees.”
She added that requests from both parties represent “a concerning trend by both parties of politicizing the management of public pension funds,” as reported by Bloomberg.
According to Reuters, BlackRock sent the memo to 43 state treasurers, auditors, and other officials after receiving duelling letters in recent weeks.
In late July, 26 Republicans questioned whether the firm placed too much emphasis on climate change. Earlier in August, 17 Democrats countered that climate change was among the “unmanaged risks” requiring more attention from investors.
Bloomberg reported that Democrats urged managers to account for long-term effects such as climate change in their investment decisions.
Republicans, meanwhile, told firms to prioritise financial returns and avoid influencing portfolio companies over “speculative predictions” about the environment.
Moffat cited BlackRock’s proxy voting policies, noting that clients value its role as an engaged shareholder.
“At the same time, BlackRock is not an activist investor,” she said, adding that studies show political constraints on pension funds lower or cut returns, according to Reuters.
With US$12.5tn in assets under management, BlackRock holds significant sway in corporate director elections and in environmental or social resolutions.
Reuters reported that the firm reduced its support for environmental and social activists, backing them only 4 percent of the time in 2024, with a similar rate expected in 2025.
As per Bloomberg, BlackRock has scaled back its green initiatives.
Chief Executive Officer Larry Fink dropped the use of the term “ESG,” and the company exited both the Net Zero Asset Managers group and Climate Action 100+.
These steps helped the firm secure removal from Texas’ blacklist of companies accused of boycotting fossil fuels, ending a three-year dispute in that state.
Reuters noted that despite these changes, BlackRock continues to face pressure.
Conservative critics remain, while some Democratic officials have threatened to pull money if the firm does not take a more activist stance.
