Texas Cuts Ties With BlackRock Over ESG
The Texas Permanent School Fund (PSF) has decided to withdraw $8.5 billion from investment with BlackRock Inc. This move was announced on Tuesday, spurred by allegations against BlackRock for its robust support of environmental, social, and governance (ESG) initiatives. According to Texas State Board of Education Chairman Aaron Kinsey, this decision was necessary to align with the state’s 2021 legislation, which prevents state investments in firms like BlackRock that divest from energy companies.
Kinsey pointed out the fund’s fiduciary duty to Texas schools. With approximately $1 billion annually from the oil and gas sectors, the PSF’s investment strategies are pivotal for sustaining Texas’ educational infrastructure.
Texas Schools Fund Moves To Pull $8.5 Billion Contract With BlackRock https://t.co/2RUopvBpn7 pic.twitter.com/1BGvaBWQzv
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Other Republican-controlled states have divested from BlackRock recently as part of the growing backlash against its ESG-centric investment approach, directly aligned with a “woke” agenda. BlackRock is attempting to maintain its prior claims that its investments in the Texas energy sector show the firm’s commitment to the state’s economic growth.
In response to the termination, BlackRock lamented the decision, asserting that it overlooks the substantial benefits the company has brought to Texas and its educational system through consistent, long-term financial performance. However, Kinsey counters this by pointing to BlackRock’s leadership in ESG movements as harmful to Texas’ oil and gas industry, which is the backbone of the PSF revenue stream.
This withdrawal is part of a broader, nationwide debate over the role of ESG in investment practices, especially concerning public funds. Critics argue that prioritizing ESG criteria over financial performance can deviate from the primary objective of investment funds: to maximize returns for stakeholders, in this case, the Texas education system.
Texas officials argue that BlackRock’s policies undermine the state’s energy sector and deviate from the fiduciary responsibilities owed to Texas schools and students. The decision by the Texas PSF to terminate its contract with BlackRock represents a significant moment in the ongoing conflict between state-level interests and global investment strategies. This action sends a clear message from Texas to the investment community: align with state interests or face financial consequences.
This case underscores the growing divide between conservative states and financial entities that adopt ESG principles. While proponents of ESG argue that considering environmental, social, and governance factors is essential for long-term sustainability, critics, particularly within GOP-led states, see this as a politicization of financial decisions and a threat to traditional industries like oil and gas, which are central to Texas’ economy.
Furthermore, this move might intensify the debate around ESG investing, prompting a closer examination of how these strategies align with the fiduciary duties of public funds. As this situation develops, the financial sector and state governments may need to navigate a delicate balance between embracing sustainable practices and safeguarding the economic interests of their constituents.