News Summary
The Indiana Public Retirement System has voted to end its relationship with BlackRock due to concerns about the investment firm’s ESG policies. Indiana Treasurer Daniel Elliott criticized BlackRock’s practices, asserting they conflict with fiduciary duties to protect public retirement funds. This change reflects a national trend of states reevaluating their investment partnerships in light of political and economic considerations. INPRS is now searching for new investment managers to handle the state’s pension assets previously managed by BlackRock.
Indianapolis, Indiana — Indiana Public Retirement System Moves to Dismiss BlackRock from Pension Management
The Indiana Public Retirement System (INPRS) board has unanimously voted to cease partnering with BlackRock, the world’s largest investment management firm, citing concerns over the company’s environmental, social, and governance (ESG) policies. This decision marks a significant shift in the state’s approach to managing its pension funds amid ongoing debates about the role of ESG criteria in investment strategies.
Key Reasons for the Decision
The move was driven by accusations from Indiana Treasurer Daniel Elliott that BlackRock’s adherence to certain ESG commitments was potentially illegal and misaligned with the fiduciary responsibilities owed to public pension beneficiaries. Elliott indicated that the decision was made with the intention of prioritizing the interests of “Hoosier public servants” and protecting their retirement funds from policies he characterized as “woke corporate policies.”
The board’s vote reflected their confidence that alternative service providers capable of managing the state’s pension portfolio were available. While BlackRock manages a portfolio worth approximately $10.5 trillion, the assets under management for Indiana’s pension fund are significantly smaller, with BlackRock handling about $969 million of Indiana’s assets as of October 2024.
Transition and Search for New Providers
Following the decision, INPRS is tasked with selecting a new investment firm to replace BlackRock. The process involves issuing a request for proposals (RFP), with at least five firms initially expressing interest. Out of these, three firms—State Street, UBS, and Northern Trust—are considered the leading candidates.
While all three have been involved in ESG-related initiatives, they have also assisted other states in boycotting firms like BlackRock over similar disagreements related to investment policies. The selection process will focus on fiduciary performance, costs, and compliance with state policies.
Heft of BlackRock’s Portfolio
BlackRock’s influence is substantial on the global stage, managing assets totaling $10.5 trillion. However, its engagement with Indiana’s pension system is relatively small, with the assets transitioned from BlackRock expected to be managed by the new provider in the near future. The assets involved in Indiana’s pension fund are just under $1 billion, emphasizing the targeted scope of the state’s decision.
Reactions and Criticisms
The decision has sparked reactions from groups aligned with the Alliance for Prosperity and a Secure Retirement, which criticized the board’s move, citing BlackRock’s effective management of fees and strong investment returns for Indiana. They argued that the choice appears to be influenced largely by political considerations rather than sound fiduciary principles.
Critics have also raised concerns about potential political bias influencing the trustees’ decision, questioning whether ideological motives are overshadowing the primary obligation of safeguarding pension assets.
Background Context
The debate over ESG policies in investment has become increasingly prominent nationwide, with some states advocating for divestment from firms perceived to promote policies conflicting with traditional economic interests. Indiana’s current move aligns with a broader national pattern among certain policymakers seeking to prioritize economic performance over ESG commitments.
As INPRS transitions to new management, the focus will be on maintaining the integrity and performance of the pension fund while navigating the growing ideological divide surrounding ESG investing.
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Additional Resources
- Indiana Capital Chronicle
- WISH TV
- Kiplinger
- Fortune
- ESG Today
- Wikipedia: Environmental, social and corporate governance
- Google Search: pension funds Indiana
- Google Scholar: pension funds ESG
- Encyclopedia Britannica: investment
- Google News: Indiana Public Retirement System BlackRock
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