Texas schools pull $8.5 billion from BlackRock over fossil fuel ‘boycott’

Texas’s public schools are pulling out billions of dollars that had been invested with asset manager BlackRock — a firm the state accused of boycotting fossil fuels.

On Tuesday, Aaron Kinsey (R), head of the state board of education, announced that his agency was pulling $8.5 billion out of management by BlackRock.

The company’s “dominant and persistent leadership” in the environmental, social and governance (ESG) movement “immeasurably damages our state’s oil & gas economy and the very companies that generate revenues” for Texas’s Permanent School Fund (PSF), which supports the state’s public schools, Kinsey said in a statement.

The fossil fuel industry contributed about $26 billion in state and local taxes in 2023 — about $1.8 billion of which went into the fund.

That means fossil fuel money accounts for about 80 percent of the $2.2 billion annual budget of K-12 schools. (The total amount in the fund is about $53 billion, which is invested with thir-party asset managers like BlackRock.) 

The anti-ESG campaign in Texas and elsewhere has hinged on the idea that asset managers that don’t invest in fossil fuels are risking their customers’ investments for the sake of politics — a case 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 its response, BlackRock accused Texas of also putting 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, said the move to pull PSF investments out of BlackRock amounted to a government mandate to support 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 fight against ESG was life-or-death for the state schools.

“That money originates from the oil and gas industry primarily,” he said. “If there’s no income, no billion dollars a year from oil and gas, that’s a problem for our fund, obviously an existential long-term risk.”