Texas School Fund Ends Contract with BlackRock Over Fossil Fuel Boycott

The Texas school fund has terminated its contract with BlackRock, citing the investment giant’s alleged boycott of fossil fuel energy producers. The fund, managing approximately $8.5 billion of state money, accuses BlackRock of violating state law and breaching its fiduciary duties.

Denial and Rebuttal by BlackRock:

BlackRock has denied engaging in any boycott and asserts that the amount withdrawn from its management represents a small fraction of its total assets, which exceeds $10 trillion. The firm refutes the allegations and defends its investment strategies.

Controversy Surrounding ESG Investing:

The incident underscores the ongoing controversy surrounding environmental, social, and corporate governance (ESG) investing, particularly in Republican-run states like Texas. BlackRock’s approach to ESG criteria has drawn scrutiny and criticism from certain stakeholders.

Legal and Financial Implications:

Aaron Kinsey, Chair of the Texas State Board of Education, emphasizes compliance with state law and expresses concerns about potential financial risks associated with divesting from energy companies. The fund’s reliance on revenue from the oil and gas industry adds complexity to the decision-making process.

BlackRock’s Response and Investments in Texas:

BlackRock refutes the decision as arbitrary and highlights its substantial investments in Texas’s public energy sector, totaling $120 billion. CEO Larry Fink emphasizes the adverse impact of political backlash on BlackRock’s finances but underscores the firm’s resilience in attracting net inflows.

Shift in Narrative and Engagement Efforts:

In response to criticism, BlackRock has signaled a shift from the term “ESG.” It has initiated engagement efforts, such as hosting a summit in Houston focused on investing in the state’s infrastructure. These actions reflect BlackRock’s efforts to address concerns and maintain its reputation amid controversy.