Texas will pull some $8.5 billion in investments from BlackRock over its ESG policies, the biggest such divestment after several Republican states have moved to cut ties with firms that conservatives see as privileging liberal goals.
Texas State Board of Education Chairman Aaron Kinsey announced the move on Tuesday. A letter was sent to BlackRock the same day notifying the world’s largest money manager. The divestment was done to comply with the state’s anti-environmental, social, and governance law, which prohibits state investment in companies like BlackRock that Republicans say boycott energy companies.
“BlackRock’s dominant and persistent leadership in the ESG movement immeasurably damages our state’s oil and gas economy and the very companies that generate revenues for our [Permanent School Fund],” Kinsey said. “Texas and the PSF have worked hard to grow this fund to build Texas’s schools.”
“BlackRock’s destructive approach towards the energy companies that this state and our world depend on is incompatible with our fiduciary duty to Texans,” he added.
BlackRock, though, argues that it is helping millions of Texans and emphasized its investment in the state.
“On behalf of our clients, we’ve invested more than $300 billion in Texas-based companies, infrastructure and municipalities, including $125 billion invested in the energy sector, including $550 million [in] a joint venture with Occidental,” a spokesperson said in a statement provided to the Washington Examiner. “We recently hosted an energy summit in Houston designed to explore how to strengthen Texas’ power grid.”
ESG is a financial concept that centers on compelling social change through investment and divestment. It is a corporate model that doesn’t solely look at maximizing profit but also incorporates other elements into financial decisions — for instance, how an investment might affect fossil fuel emissions.
There has been a Republican backlash against ESG and so-called woke corporate business practices in recent years. BlackRock, in particular, has emerged as a major target, with several Republican state attorneys general and state treasurers going after the massive firm.
“No matter whether it’s called ‘stakeholder capitalism’ or ‘transition investing,’ if the intent of an asset manager is to end America’s oil and gas industry then they can expect continued pushback from conscientious public officials looking out for their constituents,” said Derek Kreifels, CEO of the State Financial Officers Foundation.
BlackRock CEO Larry Fink has emerged as one of the most prominent faces of the ESG push. For instance, in 2020, Fink’s much-anticipated annual letter focused on climate change, saying the matter was becoming a “defining factor” in BlackRock’s assessment of companies.
BlackRock argues that it merely asks companies to provide disclosures on material issues that affect their businesses so that investors can appraise risks, such as climate change, and make informed financial decisions.
The Texas law in question that gave way to Tuesday’s divestment announcement was passed in 2021 alongside a similar measure focused on the firearms industry. Proponents argue it helps protect the state’s energy industry, although critics contend it has stifled economic activity in the Lone Star State.
A recent study on behalf of the Texas Association of Business and Chamber of Commerce Foundation found that the Texas laws would result in hundreds of millions of dollars of lost economic activity over time.
The Texas divestment isn’t the first time GOP-led states have targeted BlackRock through divesting.
South Carolina, Utah, Arkansas, Missouri, Louisiana, and other states have also divested or announced planned divestments of hundreds of millions of dollars from BlackRock and Fink.
Florida’s chief financial officer announced in 2022 that the state would divest some $2 billion from BlackRock, which was the largest such state divestment from BlackRock before Tuesday’s announcement from Texas.
