Republican Sens. Pat Toomey of Pennsylvania and Ron Johnson of Wisconsin say BlackRock and State Street’s support of environmental, social, and governance (ESG) investing suggests they are “not putting federal employees’ retirement security first.”
In a letter to Federal Retirement Thrift Investment Board (FRTIB) Chairman David Jones, the senators said they are concerned about “troubling statements” made by BlackRock and State Street—which manage federal employees’ retirement investments—that indicate they “may be prioritizing their CEOs’ personal policy views over retirees’ financial security.”
In particular, the senators are critical of the firms using their control of proxy votes for the federal employees’ Thrift Savings Plan investments “to pressure other companies to adhere to their own environmental and social policy views.” The Thrift Savings Plan is a defined contribution (DC) plan administered by the FRTIB for US civil service employees and retirees as well as members of the uniformed services.
“While these proxy voting guidelines are ostensibly focused on the investor’s fiduciary advantage,” the senators wrote, “both entities are increasingly incorporating left-leaning environmental, social, and corporate governance priorities into these guidelines.”
The senators criticized BlackRock for earlier this year announcing key changes in its voting guidelines to address concerns such as the transition to a low-carbon economy and diversity, equity, and inclusion (DE&I). They also derided State Street for its ESG priorities, saying “not to be outdone, SSGA’s CEO stated ‘our main stewardship priorities for 2021 will be the systemic risks associated with climate change and a lack of racial and ethnic diversity.’”
Toomey and Johnson are calling on the FRTIB to provide a briefing with details of the two asset managers’ policies for using proxy voting rights derived from plan assets. They also presented a list of demands for Jones to fulfill, including providing the most recent contracts between FRTIB and BlackRock and State Street regarding the management of the Thrift Savings Plan’s assets, including any provision related to proxy voting authorities. They also want information on any proxy vote within the past five years on a shareholder proposal in which the asset managers failed to vote in line with a company’s management, among other requests.
While the letter focused on the BlackRock and State Street’s potential ESG influence over the Thrift Savings Plan, it did not mention last month’s recommendation by the US Government Accountability Office (GAO) for the FRTIB to evaluate the Thrift Savings Plan’s investment offerings to assess its exposure to climate change risk.
The GAO’s recommendation was part of a 50-page report examining retirement plans’ exposure to climate change-related investment risks, what retirement plans in other countries have done to address those risks, and how they communicate this information to the public. It also looked at what steps the FRTIB has taken to address investment risks from climate change.
A spokesperson for State Street Global Advisors told CIO that “we believe that asset stewardship is our fiduciary responsibility and one of the ways we add value for investors,” adding that “as long-term investors, we always take a broad view of ESG factors as they relate to sustainable returns.”
A BlackRock spokesperson said, “BlackRock Investment Stewardship (BIS) performs independent research and analysis on behalf of our clients. We cast informed votes aligned with clients’ long-term economic interests. We see this responsibility as part of our fiduciary duty.”
Tags: Black Rock, climate change, environmental social and governance, ESG, Federal Retirement Thrift Investment Board, FRTIB, GAO, Government Accountability Office, Pat Toomey, Ron Johnson, State Street Global Investors, Thrift Savings Plan, TSP