BlackRock Dismayed by Texas Fund Decision to Divest $8.5 Billion in Assets

BlackRock has asked Texas authorities to reconsider the withdrawal of $8.5 billion in assets of the Permanent School Fund from the asset manager.

The decision to withdraw from BlackRock was announced earlier this week by the Texas State Board of Education Chair, who cited the 2021 law that Texas passed to penalize financial firms that, according to state authorities, discriminated against energy companies.

"We urge you to reconsider your decision and prioritize Texas schools and families who have benefited from BlackRock's consistent, long-term investment out-performance," BlackRock Vice Chairman Mark McCombe wrote in a letter to Texas State Board of Education Chair Aaron Kinsey, as quoted by Reuters.

The letter also argued that the divestment by the Permanent School Fund was not required under Texas law because the vehicles that managed that money were doing so well a divestment would not be in the best interest of the fund.

"That money originates from the oil and gas industry primarily... 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," Aaron Kinsey told Reuters following the announcement of the divestment decision.

The law that the Texas State Board of Education Chair based his divestment decision on was part of a backlash among energy-producing states against the ESG investment drive among asset managers that saw most threaten to suspend business with the oil and gas industry as a way to reduce their emissions.

BlackRock has claimed it does not boycott the Texas oil and gas industry, noting this week that it has $120 billion in investments in Texas public energy companies, out of a total $320 billion in energy investments globally.

The initial reaction of the asset manager to the Texas fund’s divestment was that the amount divested was a tiny portion of its $10 trillion under management.

By Irina Slav for Oilprice.com

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