The world’s largest asset manager had to clarify earlier this year that it is and will continue to be an energy investor with $91 billion invested in fossil fuel companies in Texas alone, after the biggest oil-producing state in the U.S. passed a new law relating to state contracts with and investments in certain companies that boycott energy companies. Texas Comptroller Glenn Hegar is drafting a list of companies that are boycotting energy companies. The state would then cease doing business with any firms or asset managers that have anti-oil policies or push for “net-zero” portfolios.
Texas is not the first U.S. state to consider dropping top asset managers because of those asset managers’ environmental, social, and governance (ESG) criteria.
Yet, the standoff between the biggest asset manager in the world, BlackRock, and the biggest oil-producing state in America is indicative of the growing backlash of major fossil fuel states against the net-zero and ESG trends.
The Texas comptroller has the difficult task of compiling a list of those financial institutions that boycott oil and gas, which could potentially harm the state’s energy industry.
The official is being urged to put BlackRock on the top of that list, while the asset manager said in a memo in early January, “We will continue to invest in and support fossil fuel companies, including Texas fossil fuel companies.”
BlackRock has never said it would discontinue investments in fossil fuels, but it now has to balance the message for Texas, following the asset manager’s increased focus on ESG.
“Importantly, we believe that the experience, expertise, and scale of fossil fuel companies will be integral to future energy solutions. As such, we have not and will not boycott energy companies,” BlackRock said in the letter in early January.
BlackRock, on behalf of its clients, had $259 billion in assets invested in fossil fuel companies globally as of June 30, 2021, including $91 billion invested in Texas fossil fuel companies alone.
“We are perhaps the world’s largest investor in fossil fuel companies, and, as a long-term investor in these companies, we want to see these companies succeed and prosper,” said the asset manager which holds 6.3% in ExxonMobil, 7.9% in ConocoPhillips, 9.1% in Occidental, and 6.8% in Pioneer Natural Resources, which are among BlackRock’s top ten holdings in Texas energy companies.
“We’re proud of our commitment to and investments in Texas and Texas-based energy companies, which positively contributes to the Texas economy and helps to create more economic opportunity for millions of Texas families,” BlackRock’s letter signed by Dalia Blass, Senior Managing Director, Head of External Affairs, reads.
Those assurances came as Texas Lt. Gov. Dan Patrick sent a letter to Comptroller Hegar “asking him to place BlackRock at the top of the list of financial companies that boycott the Texas oil & gas industry.”
“When the Senate passed Senate Bill 13, we made it clear that Texans will not tolerate Wall Street turning its back on our flourishing oil and gas industry and the millions of Texans who rely upon it,” Patrick said.
But just as Lt. Gov. Patrick was calling for blacklisting BlackRock, Texas-based giant ExxonMobil announced its ambition to achieve net-zero greenhouse gas emissions for operated assets by 2050.
So, net-zero is not only investors’ latest whim, it is now part of the narrative of the world’s biggest oil firms, and Exxon was actually one of the last supermajors to pledge net-zero emissions.
Texas may be considering dropping BlackRock, but West Virginia has already done it.
Last month, West Virginia State Treasurer Riley Moore said the Board of Treasury Investments, which manages the state’s roughly $8 billion operating funds, will no longer use a BlackRock investment fund as part of its banking transactions. The decision follows reports “that BlackRock has urged companies to embrace “net zero” investment strategies that would harm the coal, oil and natural gas industries while increasing investments in Chinese companies that subvert national interests and damage West Virginia’s manufacturing base and job market.”
“Any company that thinks Communist China is a better investment than West Virginia energy or American capitalism clearly has a bad strategy,” Treasurer Moore said.
In November 2021, Moore announced that a coalition of 15 Republican Treasurers, Auditors, and Comptrollers of states representing over $600 billion in public assets could potentially reduce future business with banks that cut off financing for oil, gas, and coal. Those states include Texas, North Dakota, Wyoming, and West Virginia, among others.
In a letter to the banking industry, the state officials wrote, “We are writing to notify you that we will be taking collective action in response to the ongoing and growing economic boycott of traditional energy production industries by U.S. financial institutions.”
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Geopolitical Risk Premium Could Send Oil Prices To $120
- OPEC Gets Further Behind Oil Production Quotas
- Oil Prices Will Hit $100 And Stay There - Vitol CEO