Austin, Texas – The State of Texas is cutting ties with asset manager BlackRock, terminating an $8.5 billion investment due to the firm’s alleged boycott of energy companies. The move comes as part of a broader trend of Republican-led states severing financial relationships with institutions embracing environmental, social, and governance (ESG) standards.
The action, initiated by the Texas Permanent School Fund (PSF), represents the largest divestment of its kind to date. The fund, established in the 19th century to support public schools in Texas, aims to distance itself from financial institutions boycotting the oil and gas sector. State Board of Education Chairman Aaron Kinsey emphasized the importance of protecting Texas schools’ funding, which includes approximately $1 billion in annual oil and gas royalties.
Texas, known for its prominence in the energy industry, passed Senate Bill 13 in 2021 to address concerns over financial companies boycotting fossil fuel companies. The state comptroller has been tasked with identifying such companies, with BlackRock recently added to the list. The divestment decision by the Texas PSF reflects a commitment to upholding state law and ensuring the fund’s longevity in supporting educational endeavors.
BlackRock, managing over $10 trillion in assets, has faced scrutiny for its ESG practices. The firm has defended itself, pointing out investments in traditional energy companies and collaborations with the energy sector. Despite BlackRock’s efforts to work with the industry, Texas officials, including Kinsey, remain firm in their stance against what they perceive as damaging actions toward the state’s economy and educational funding.
The divestment move has garnered support from various corners, with State Financial Officers Foundation CEO Derek Kreifels and Consumers’ Research Executive Director Will Hild commending Texas’ bold action. The decision signifies a pushback against Wall Street’s influence on investment strategies and political agendas. Texas’ stance against ESG policies sends a clear message that public fiduciaries prioritize the best interests of their constituents over ideological pressure from financial institutions.
The termination of the $8.5 billion investment with BlackRock adds Texas to the list of states, including Florida, Arizona, and West Virginia, that have taken similar steps to distance themselves from ESG-focused asset managers. While critics argue that such divestments could harm consumers and economic activities, proponents see it as a necessary step to uphold fiduciary duties and protect vital industries. The clash between financial interests and ESG principles continues to shape investment strategies and policy decisions nationwide.