Texas Withdraws $8.5 Billion from BlackRock, Impacting ESG Movement

The state of Texas is ending a large $8.5 billion investment with trillion-dollar asset manager BlackRock after determining that the corporation is involved in an energy boycott.

In an announcement initially shared with FOX Business, Texas State Board of Education Chairman Aaron Kinsey stated that the so-called Texas Permanent School Fund (PSF) sent a notification to BlackRock on Tuesday, advising the New York City-based corporation of the action. According to Kinsey, the decision was made in compliance with a 2021 state law aimed at distancing the state and its enormous public purse from financial institutions boycotting the oil and gas industry.

“The Texas Permanent School Fund has a fiduciary duty to protect Texas schools by safeguarding and growing the approximately $1 billion in annual oil and gas royalties managed by the Texas General Land Office,” Kinsey said in a statement released on Tuesday. “Terminating BlackRock’s contract ensures PSF’s full compliance with Texas law.”

Texas Withdraws $8.5 Billion from BlackRock, Impacting ESG Movement

“BlackRock’s dominant and persistent leadership in the ESG movement has a significant negative impact on our state’s oil and gas economy and the companies that generate revenue for our PSF.” Texas and the PSF have worked hard to increase the size of this fund in order to develop Texas schools,” he added. “BlackRock’s destructive approach toward the energy companies that this state and our world depend on is incompatible with our fiduciary duty to Texans.”

The divestment represents a significant portion of the $53 billion Texas PSF, a fund established in the nineteenth century to support the state’s public schools. The measure is also by far the greatest of its kind since Republican-controlled governments began cutting links with BlackRock and other financial companies over their pursuit of so-called environmental, social, and governance (ESG) norms.

The ESG movement, which has gained traction in recent years, advocates for investments to be shifted away from traditional energy companies and toward green energy industries in the fight against global warming. However, the ESG movement has encountered strong opposition from both the energy business and state and federal legislators.

As part of such reaction, Texas approved Senate Bill 13 in 2021, which requires the state comptroller to compile a list of financial institutions that boycott fossil fuel corporations. Texas Comptroller Glenn Hegar most recently updated the list in October, adding BlackRock and other funds run by the firm, and has urged the Texas Permanent School Fund, as well as five state pension funds, to cut connections with the asset manager.

“Today marks a significant advancement for the Texas PSF and our state as a whole. “The PSF will not sit idly by while Wall Street attacks our financial future,” Kinsey declared Tuesday. “This bold action helps ensure our PSF remains in fact permanent and will continue to support bright futures and opportunities for generations of Texas students.”

BlackRock, which manages more than $10 trillion in assets, has sought to defend itself in recent months against accusations that it is boycotting energy companies, stating that it remains invested in traditional energy companies but considers ESG issues because it serves clients with a variety of investment goals. Furthermore, the company collaborated with large energy company Occidental Petroleum late last year on a carbon capture project in Ector County, Texas.

“BlackRock is helping millions of Texans invest and save for retirement,” a BlackRock representative told FOX Business. “On behalf of our clients, we’ve invested more than $300 billion in Texas-based businesses, infrastructure, and communities, with $125 billion in the energy sector and a $550 million joint venture with Occidental. We recently conducted an energy summit in Houston to discuss how to strengthen Texas’ electricity grid.

“Today’s unilateral and arbitrary decision by Board of Education Chair Aaron Kinsey jeopardizes Texas schools and the families who have benefited from BlackRock’s consistent long-term outperformance for the Texas Permanent School Fund,” BlackRock said in a statement released on Tuesday.

“The judgment rejects our $120 billion investment in Texas public energy businesses and goes against expert advise. As a fiduciary, politics should never come before performance, especially for taxpayers.”

Derek Kreifels, CEO of the State Financial Officers Foundation, and Will Hild, executive director of Consumers’ Research, who have led national resistance to ESG laws, applauded Texas’ approach.

“Today’s bold step by Aaron Kinsey and the Permanent School Fund of Texas, in accordance with state law, is a massive blow against the scam of ESG,” Kreifels said in a press release. “This is what happens when public fiduciaries stand up for those to whom they owe a duty, instead of bowing down to Wall Street’s asset managers who continue to abuse their position in the market to advance radical ideologies.”

“For years, under Larry Fink’s leadership, BlackRock has misused customer assets to advance a political agenda. Nowhere was this more egregious than in Texas, where BlackRock was attempting to destroy the native oil and gas business while managing funds based on royalties from the same industry,” Hild noted. “A more flagrant violation of fiduciary duty is difficult to imagine.”

Hild stated that Texas’ divestment sends a “clear message” to “Wall Street elites that people can no longer be bullied into complying with ESG’s destructive ideology.”

Prior to Tuesday’s announcement, Arizona, Arkansas, Florida, Louisiana, Missouri, South Carolina, Utah, and West Virginia all announced similar divestments. The previous greatest disposal was Florida’s, which was valued $2 billion and announced by Florida Chief Financial Officer Jimmy Patronis in December 2022.

Some critics of the government’s initiatives to distance themselves from BlackRock and other asset managers claim the actions damage consumers. For example, a report issued last week by the Texas Association of Business Chambers of Commerce Foundation found that Texas ‘Fair Access’ legislation will result in $668.7 million in lost economic activity and 3,034 fewer full-time, permanent jobs.

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