Texas Pulls $8.5 Billion From BlackRock Over ESG Investing - ESG Today (2024)
The Texas State Board of Education announced on Tuesday the termination of an investment with BlackRock, pulling $8.5 billion in funds from the investment giant, with a statement by the Board’s Chairman Aaron Kinsey citing BlackRock’s “dominant and persistent leadership in the ESG movement.”
BlackRock, as the largest global investment management company, and a leading voice in the investment community on climate and energy transition-related investment themes, has found itself at the center of a vocal anti-ESG movement by Republican politicians in the U.S., who have accused the firm of following a social agenda, or of “boycotting” and working to harm energy companies.
Texas has been one of the most active states at the forefront of anti-ESG initiatives, with recent actions including banning UK bank Barclays from the municipal bond market over its ESG policies, creating a list of asset managers for potential divestment for allegedly boycotting energy companies, as well as conducting a hearinggrilling executivesfrom BlackRock and State Street over their ESG and climate-related stewardship, engagement voting and investment practices.
While the state has become increasingly active in its anti-ESG advocacy, however, its actions may come at a significant cost to investors. While several states have introduced proposals to disallow ESG investing, many have faced pushback over the cost and estimated lost returns likely to result from these anti-ESG initiatives. An assessment by the Texas County & District Retirement System (TCDRS), for example, analyzing a proposed law last year at prohibiting ESG investing in the state’s public retirement investment system estimated that the legislation could cost the retirement system more than $6 billion over ten years in lost returns, and keep the system from partnering with top investment managers.
In a social media post following the Board of Education announcement, Senator Bryan Hughes, who filed the 2023 anti-ESG legislation and led the above-mentioned hearing, said:
“BlackRock and Wall Street firms like it have been using Texans’ money to push a left-wing agenda.
“Texas continues to fight back.
“That is why we’re pulling $8.5B from BlackRock, making it clear to Wall Street firms that they cannot use taxpayer money to hurt Texas jobs and attack our energy dominance.”
BlackRock and Wall Street firms like it have been using Texans’ money to push a left-wing agenda.
Texas continues to fight back.
That is why we’re pulling $8.5B from BlackRock, making it clear to Wall Street firms that they cannot use taxpayer money to hurt Texas jobs and…
In the statement, Kinsey said that the decision to terminate its investment with BlackRock was made in order to keep the Texas Permanent School Fund (PSF) in compliance with 2021 legislation, known as Senate Bill 13, which prohibits “investment in financial companies that boycott certain energy companies.”
Kinsey added:
“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.”
In a recent statement pushing back against claims made during a Republican presidential debate that BlackRock is pushing an ideological agenda and that it holds back energy companies from producing oil, BlackRock CEO Larry Fink highlighted the firm’s close ties with the energy industry, noting that the firm’s clients have invested over $170 billion in U.S. energy companies.
Despite the political pressure, however, BlackRock signaled earlier this year in its release of its 2024 engagement priorities that its engagements with companies would continue to include sustainability-focused topics such as “Climate and natural capital” and “Company impacts on people.” while also explaining that its approach to climate-related risks and opportunities focused on understanding the expected impact of these factors on companies’ strategies and long-term business models, and stressing that “it is not our role to engineer a specific decarbonization outcome in the real economy.”
In a statement following the Texas State Board of Education announcement, a BlackRock spokesperson said:
“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.”
The Texas State Board of Education announced on Tuesday the termination of an investment with BlackRock, pulling $8.5 billion in funds from the investment giant, with a statement by the Board's Chairman Aaron Kinsey citing BlackRock's “dominant and persistent leadership in the ESG movement.”
Last Tuesday, the Texas Board of Education's chairman, Aaron Kinsey, announced that BlackRock's “destructive approach” toward the state's large oil and gas industry prompted the PSF divestment. Texas is among several Republican-controlled states that bar asset managers and banks they believe boycott energy companies.
While the results from these time periods have been generally encouraging for ESG funds as a whole, we don't see convincing evidence that ESG funds are reliably better than non-ESG funds.
Laurence D. Fink is Chairman and Chief Executive Officer of BlackRock. He and seven partners founded BlackRock in 1988, and under his leadership, the firm has grown into a global leader in investment and technology solutions.
BlackRock, Inc., holds 3.60% of Walmart shares, worth about $13.6 billion. BlackRock, Inc., is a multinational investment company in New York City. It is the largest asset manager in the world, with about $10 trillion worth of assets as of January 2022.
BlackRock's largest institutional shareholders are Vanguard Group, BlackRock Fund Advisors, State Street Global Advisors, Temasek Holdings, and Bank of America. The company's largest individual shareholders include original BlackRock owners and founders Larry Fink and Susan L. Wagner, Robert S.
As expected, BlackRock's top equity holdings include America's most established tech companies: Apple, Microsoft, Amazon, and Google. BlackRock also has large positions in Nvidia and Broadcom, which happen to be America's two largest semiconductor companies.
Fink is the CEO and co-founder of BlackRock. Along with seven colleagues, he started the company. As of 31 January 2023, he owned 520,126 making him the biggest individual shareholder.
However, there are also some cons to ESG investing. First, ESG funds may carry higher-than-average expense ratios. This is because ESG investing requires more research and due diligence, which can be costly. Second, ESG investing can be subjective.
Rising interest, says Matos, spurred investment managers — including the “big three” of BlackRock, State Street and Vanguard — to tout ESG-focused offerings, for both idealistic and practical reasons.
BlackRock ranked as the biggest ESG asset manager, accounting for 20 of the top 100 such funds, with total assets under management of $110 billion. DWS Group came in second place with $36 billion in AUM (comprising 11 funds), followed by Parnassus Investments with $33 billion (three funds).
“The basic theory behind ESG investing is that a company's returns may be impacted by environmental, social, and governance factors in addition to traditional financial factors,” says Michael James Maloney, a partner at Felicello Law, P.C., in New York City.
So far, Florida ($2 billion), Louisiana ($794 million), Arizona ($543 million), Texas ($500 million + $8.5 billion = $9 billion), Missouri ($500 million), South Carolina ($200 million), Arkansas ($125 million), Utah ($100 million), and West Virginia ($21.8 million) have made the decision to divest from BlackRock (a ...
A top executive at global asset management giant BlackRock pushed back with force Thursday on a decision by the chairman of the State Board of Education this week to withdraw an $8.5 billion investment in the company over accusations that it is hostile to the Texas oil and gas industry.
Prior to the action announced Tuesday, Arizona, Arkansas, Florida, Louisiana, Missouri, South Carolina, Utah and West Virginia announced similar divestments. The largest previous divestment was Florida's, worth $2 billion, announced by Florida CFO Jimmy Patronis in December 2022.
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