The Texas Board of Education is divesting $8.5 billion from BlackRock because of the asset manager’s Environmental, Social, and Governance investment philosophy.
The Texas Permanent School Fund (TPSF) will be terminating its financial relationship with BlackRock and searching for a new firm to manage its $8.5 billion of state assets, the TPSF notified BlackRock on Tuesday.
“Today, PSF leadership delivered an official notice to global asset manager BlackRock terminating its financial management of approximately $8.5 billion in Texas’ assets. Terminating BlackRock’s contract ensures PSF’s full compliance with Texas law,” Texas Board of Education Chairman Aaron Kinsey said in a statement shared with National Review.
“BlackRock’s dominant and persistent leadership in the ESG movement immeasurably damages our state’s oil & gas economy and the very companies that generate revenues for our PSF. Texas and the PSF have worked hard to grow this fund to build Texas’ schools.”
Texas state law prohibits state investment in financial services companies that boycott the oil and gas industry, a major aspect of the state economy. The environmental aspect of BlackRock’s ESG strategy promotes an economic transition away from fossil fuels and towards green energy investments.
“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. The decision ignores our $120 billion investment in Texas public energy companies and defies expert advice. As a fiduciary, politics should never outweigh performance, especially for taxpayers,” BlackRock told National Review in a statement.
The TPSF outperformed BlackRock’s targeted benchmarks over the past five years net of fees, BlackRock said in an annual report last year. The fund achieved 6.14 percent returns last year, above the 4.38 percent benchmark, and a 6.19 percent return over five years, higher than the 5.52 percent.
Advocates against ESG believe the TPSF’s move to end its financial relationship with BlackRock is a significant step in the pushback against ESG.
“Under Larry Fink’s leadership, BlackRock has been misusing client funds to push a political agenda for years. Nowhere was that more egregious than in Texas, where BlackRock was simultaneously trying to destroy the domestic oil and gas industry while managing funds that depended on royalties derived from that very same industry. A more flagrant violation of fiduciary duty is difficult to imagine,” said Will Hild, executive director of Consumers’ Research, a leading consumer advocacy group. Hild is a prominent opponent of ESG and “woke” corporate activism.
Texas is not the only red state pushing back against BlackRock for its adoption of ESG investment goals. West Virginia Treasurer Riley Moore (R) placed BlackRock on its restricted financial institutions list in July 2022 for limiting business with the coal and natural gas sectors without a reasonable business purpose. The state recently warned six financial institutions they could be added to the list because of their environmental investing goals.
“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,” State Financial Officers Foundation CEO Derek Kreifels told NR.
“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 push back from conscientious public officials looking out for their constituents.”
BlackRock partially withdrew from an ESG investment coalition earlier this year and delegated its membership to a subsidiary. At the same time, J.P. Morgan Chase Asset Management and State Street Global Advisors fully withdrew from the investment group.