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Indiana’s public retirement oversight committee selected State Street Global Advisors to replace BlackRock Inc., which was removed as an asset manager after the state found it had participated in socially conscious investment practices.
However, Boston-based State Street, too, has been criticized— and is currently being sued by Indiana and a host of other states—for using environmental, social and governance, or ESG, investment practices. In recent months, State Street has distanced itself from such commitments.
State Street, the world’s fourth-largest asset manager, will take over the state’s global inflation-linked bond portfolio and already manages Indiana’s global fixed-income assets. The assets are planned to be transferred this month.
The board of trustees for the Indiana Public Retirement System, which manages assets for public sector employees’ retirement benefits, announced its selection during its Feb. 28 meeting, according to the meeting’s presentation slides.
The Treasurer’s Office referred IBJ to the public retirement system, or INPRS, for comment regarding the mover. A statement from INPRS did not directly address IBJ’s questions about State Street’s past ESG-aligned actions, the active lawsuit or how State Street’s practices differ from BlackRock.
“With regard to BlackRock, the Treasurer of the State conducted a review and found that BlackRock had engaged in ESG activities,” INPRS spokesperson Dimitri Kyser wrote. “Subsequent to that, and consistent with state law, the INPRS Board determined that there were comparable providers for that mandate. State Street is among the comparable providers as determined by the Board.”
Indiana passed a law in 2023 directing the INPRS board to refrain from making investments with the purpose of “influencing any social or environmental policy or attempting to influence the governance of any corporation for nonfinancial purposes.”
The law defines an ESG commitment as a decision to make asset choices that take into account non-financial factors “to further social, political, or ideological interests based on evidence indicating the purpose.” Private equity funds, which make up about 15% of the state’s total pension investments, are excluded.
Treasurer Daniel Elliott’s office produced a report last June that lists several BlackRock actions that it considers in violation of state law. It included a company disclosure noting ESG engagement, the use of third parties for ESG data and its membership in a net-zero emissions consortium.
So far, BlackRock is the first and only retirement asset manager the state has dropped to comply with the law.
If an asset manager is removed, the law requires the board to find a comparable, anti-ESG replacement. State Street, UBS and Northern Trust were identified as comparable managers to BlackRock, according to presentation slides.
State Street’s ESG history
In November, Attorney General Todd Rokita joined 10 other states in suing State Street, BlackRock and Vanguard Group. Involved attorneys general say this is part of an organized push against ESG.
The complaint alleges the trio are illegally conspiring to manipulate energy markets and targets their actions related to climate sustainability. The lawsuit more heavily focuses on BlackRock than State Street and Vanguard.
“We’re taking on very powerful forces arrayed against the interests of everyday working Hoosiers,” Rokita said in a December press release. “These ESG titans are reaping the benefits of these skyrocketed prices; by keeping their thumb on production.”
The Attorney General’s office did not immediately return IBJ’s request for comment Wednesday.
In a 2023 year-end report, State Street said it has $650 million in ESG-related assets under management. The firm also had a partnership with S&P Global Trucost to share data regarding ESG investment priorities. A 2024 report has not yet been released.
“State Street’s purpose is clear: to help create better outcomes for the world’s investors and the people they serve,” the report reads.
State Street previously hosted a landing page on its website to detail its ESG and sustainable investing efforts. The page has since been taken down.
Last February, State Street decided to leave a climate action investor coalition that seeks to curb carbon emissions, according to a trade publication.
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This is stupid. Just evaluate investment firms on their returns and not whatever other policies they may have. The trustees have a fiduciary duty to do just that.
They did prior to this law. Now they can only remain in them if they can’t find a non-ESG firm that offers equivalent returns.
But, as noted, all three of the companies that Indiana is considering are banned elsewhere for ESG. Northern Trust in West Virginia, UBS in Texas and State Street in Oklahoma.
So all we’re doing is switching from the largest fund provider guilty of prioritizing ESG to one of three smaller funds also found guilty of prioritizing ESG. This is performative nonsense with the retirement savings of Indiana’s public employees on behalf of the coal companies who write campaign contribution checks. Those behind it should be ashamed.
Joe, there’s more than three investment firms in the US. And in any event, they should go with the ones that have the most solid reputations that have been in business for a long time and that have the best returns on average over the last 5 to 10 years. Excluding E.S.G. oriented companies is stupid.
We are in agreement. Indiana has yet to find a non-ESG firm. Getting out of BlackRock still doesn’t make sense to me… this is all performative nonsense for the WIBC crowd.
If investing in coal was a quick way to big profits, someone would have started such a fund and made large money off it. If Indiana can get the best returns for it’s pension funds with a firm heavy in solar and wind energy, it would be foolish to not consider it as part of it’s portfolio.
If they’re bad investments, they won’t get the returns and Indiana will drop them. Caring about anything but returns is foolish.
I don’t know who is worse anymore. Can we just have a party that stands for common sense instead of fighting to see who can get more triggered?
Many companies have social programs… some of them are considered ESG, some are not. They’ve been around a long time.
This should be decided on merits.
Randy S. – You’re absolutely right it’s stupid but look who’s running the asylum. Throw in the soon to be disbarred wing nut Rokita, and the fix is in. Sad & pathetic.
Brian, as to Rokita’s disbarment, from your lips to God’s ear! Mr. Google tells me he would be forced to resign and Gov Braun then appoints someone until the next general election.
This is ridiculous. The state has a *fiduciary duty* to consider investment returns, not to engage in political grandstanding.
Instead of worrying about ESG, DEI, “woke,” or whatever trigger word-of-the-day hypes up the right-wing crowd, the state should only be considering investment returns and management fees when selecting an asset manager for its public retirement system.
Are there *any* reasonable adults left in Indiana government? Who is letting these bratty children run the show?
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This is the result of everyone running to be the biggest MAGAt: Braun, Rokita, Morales, and the supermajority in the legislature.
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