Texas’s public schools are divesting billions of dollars from BlackRock, a company the state accused of refusing to invest in fossil fuels.
On Tuesday, Aaron Kinsey (R), head of the state board of education, announced that his agency was removing $8.5 billion from BlackRock's management.
Kinsey stated that the company's significant role in the environmental, social and governance (ESG) movement is causing harm to Texas's oil and gas economy and the companies that generate revenues for Texas’s Permanent School Fund (PSF).
The fossil fuel industry contributed around $26 billion in state and local taxes in 2023, with approximately $1.8 billion going into the fund.
This means that about 80 percent of the $2.2 billion annual budget of K-12 schools is supported by fossil fuel money. (The total amount in the fund is about $53 billion, which is invested with third-party asset managers like BlackRock.)
The opposition to ESG principles in Texas and elsewhere has revolved around the argument that asset managers not investing in fossil fuels are jeopardizing their customers' investments for political reasons — an argument that Kinsey echoed.
“The PSF will not stand idle as our financial future is attacked by Wall Street,” he wrote. “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.”
In response, BlackRock accused Texas of prioritizing politics over profit.
The decision to pull state assets from the company “ignores our $120 billion investment in Texas public energy companies and defies expert advice,” a BlackRock spokesman said in a statement.
“As a fiduciary, politics should never outweigh performance, especially for taxpayers.”
The move comes after BlackRock CEO Larry Fink visited Texas in February, where he co-produced an energy event with Lt. Gov. Dan Patrick (R) and offered to help the state find capital to build new gas plants.
BlackRock was also one of many banks that publicly scaled back its climate investment in the face of attacks by conservative politicians — a move that state comptroller Glenn Hegar (R) called “a welcome development.”
But Patrick had also called on Hegar in 2022 to put BlackRock “at the top of the list of financial companies that boycott the Texas oil & gas industry,” and argued that a 2021 Texas law banned state agencies from doing business with the company.
Hegar did so later that year, and the company remains on an October 2023 list of companies out of compliance with that law.
Adrian Shelley, director of left-leaning nonprofit Public Citizen, stated that the decision to withdraw PSF investments from BlackRock is effectively mandating government support for the fossil fuel industry.
“The state is essentially saying private companies must invest in fossil fuels to do business with the state,” Shelley said. “It’s injecting strong-arm political tactics into a fund that benefits public schools.”
Kinsey, however, told Reuters that the battle against ESG was crucial for the state schools.
“That money comes mainly from the oil and gas industry,” he stated. “If there’s no income, no billion dollars a year from oil and gas, that’s a problem for our fund, clearly a long-term risk to our existence.”
