Top senators worry investment giants putting climate, social concerns before retirees

Sens. Toomey and Johnson single out BlackRock and State Street Global Advisors

Republican Sens. Pat Toomey and Ron Johnson wrote a letter to the Federal Retirement Thrift Investment Board’s acting chairman expressing concerns that investment giants BlackRock and State Street Global Advisors are not prioritizing the financial security of retired federal employees. 

The senators say recent statements made by BlackRock CEO Larry Fink and State Street Global Advisors CEO Cyrus Taraporevala suggest the business leaders are using their control of proxy votes to push their views on environmental and social views onto other companies. 

Ticker Security Last Change Change %
BLK BLACKROCK, INC. 876.63 -13.81 -1.55%
STT STATE STREET CORP. 84.82 -2.23 -2.56%

BlackRock is the world’s largest asset manager with $9 trillion in assets under management. State Street Global Advisors controls $3.59 trillion in assets.   

"Federal law explicitly requires all fiduciaries of the [Thrift Savings] Plan, including BlackRock and SSGA, to discharge their responsibilities ‘solely in the interest of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries,’" wrote Toomey of Pennsylvania and Johnson of Wisconsin. 

The Thrift Savings Plan is a retirement plan available to all federal employees and members of the armed services. There were 6.2 million participants and $735 billion in assets as of Dec. 31, 2020. 

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About 60% of the plan, or $442 billion, is managed by third-party firms including BlackRock and State Street. The remaining $293 billion is managed by the government and held in U.S. government securities. 

The Federal Retirement Thrift Savings Board, which oversees the plan, says the only restriction on the investment managers’ voting authorities is whether a vote is made in accordance with each firm’s proxy voting guidelines. 

Both BlackRock and State Street Global Advisors are "increasingly incorporating left-leaning environmental, and corporate governance ('ESG') priorities" into those guidelines, the senators wrote. 

BlackRock earlier this year announced "key changes" to its voting guidelines to better account for the "transition to a low-carbon economy" and "diversity, equity and inclusion," among other things.

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Additionally, BlackRock CEO Larry Fink in his annual letter to CEOs published in January called on Corporate America to provide better disclosures on ESG metrics, including climate change.

A BlackRock spokesperson told FOX Business that its BlackRock Investment Stewardship "performs independent research and analysis" and that the group "casts informed votes aligned with clients’ long-term economic interests."  

"We see this responsibility as part of our fiduciary duty," the spokesperson added.  

State Street Global Advisors’ Taraporevala, meanwhile, said that his firm’s stewardship priorities for 2021 would be the "systemic risks associated with climate change and a lack of racial and ethnic diversity."

"Asset stewardship is our fiduciary responsibility and one of the ways we add value for investors," said a spokesperson for State Street Global Advisors. "As long-term investors, we always take a broad view of ESG factors as they relate to sustainable returns." 

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Toomey and Johnson asked Federal Retirement Thrift Investment Board Acting Chairman David Jones to provide a briefing by the close of business on July 26 detailing the investment firms’ policies for using proxy voting rights derived from Thrift Savings Plan assets, in addition to the Federal Retirement Thrift Savings Board’s oversight of proxy voting use and what recourse there is if a manager is found to have violated its fiduciary duty.

Other materials requested include details about any proxy vote within the last five years in which BlackRock or State Street Global Advisors did not vote in accordance with a company’s management.