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The chief executive of global asset management giant BlackRock said Thursday that the state announced this week that it would withdraw an $8.5 billion investment in the company, citing accusations that it was hostile to Texas’ oil and gas industry. They strongly opposed the decision of the Board of Education chairman. .
BlackRock Vice Chairman Mark McComb said Texas Board of Education Chairman Aaron Kinsey’s multibillion-dollar divestment was “reckless” and “irresponsible.”
“We are disappointed in your announcement to terminate BlackRock’s management of approximately $8.5 billion in Texas Permanent School Fund assets,” McComb wrote in a public letter to Kinsey, R-Midland. said. “Your actions prioritize short-term politics over long-term fiduciary responsibility. We urge you to reconsider your decision and take advantage of BlackRock’s consistent long-term investment results. We urge you to prioritize Texas schools and families.”
Kinsey announced the divestment on Tuesday, saying that BlackRock’s corporate leadership in the movement known as “environmental, social, and governance” (ESG) will require Texas government agencies to comply with a 2021 state law called the Fair Access Act. He said it would be illegal to do business with BlackRock. , aims to protect Texas’ energy industry. Kinsey said BlackRock’s ESG stance is “disruptive” to oil and gas interests.
In his letter, McComb disputed that characterization.
“The idea that we discriminate against oil and gas based on the investments we make for our customers is simply false,” he told Kinsey. “BlackRock has more than $320 billion in global energy investments, including approximately $120 billion in publicly traded energy companies based in Texas. He is also a great investor.”
“And we are proud to not only manage our clients’ investments in Texas, but also to help more than 2 million Texans manage their pension assets.”
What does the Texas State Board of Education say?
Kinsey, CEO of a Midland oil field services company, did not immediately respond to a request for comment from U.S. government officials. However, two members of the SBOE defended the break with BlackRock.
The change means the Permanent School Fund follows the spirit of Texas law, said Tom Maynard (R-Florence), the foundation’s president and state Board of Education District 10 representative. However, he said the changes were also part of a comprehensive asset review and an effort to exit investments that had increased risk as a result.
“There was an opportunity to reduce risk and increase expected returns,” Maynard said. “Who wouldn’t do that?”
School board member L.J. Francis, R-Corpus Christi, said the decision to divest was not arbitrary.
“We have a responsibility to protect Texans and our resources, and a portion of that goes toward managing the funds that are deposited into the Permanent School Fund to be made available to Texas schools,” he said.
BlackRock’s policy on ESG investing has not changed, so the board needs to take action, Francis said.
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Why is ESG controversial?
ESG, along with policies known as “diversity, equity, and inclusion” (DEI), have been targeted by the conservative movement for being an exercise in social engineering and undermining free enterprise.
McComb said BlackRock and its management “are in full compliance with Texas law and fundamentally disagree with Mr. Kinsey’s characterization of the investment company’s policies.” BlackRock and the Permanent Schools Fund have worked together for his 18 years.
“It would be irresponsible to end in such a reckless manner a long and successful partnership that has been a positive force for thousands of Texas schools and families,” McComb said.
What is Blackrock?
Headquartered in New York City, BlackRock calls itself one of the world’s leading investment and risk management providers. According to Stock Analysis, the company’s “enterprise value” is $160.16 billion.
The company was founded in 1988 and was named one of the world’s 50 most admired companies by Forbes Magazine in 2014.
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What is the Texas Permanent School Fund?
The Permanent School Fund dates back to 1846 and was established in 1854 with a $2 million endowment from Congress. The Texas Constitution provides that “certain (state-owned) lands and all proceeds from the sale or rental of those lands constitute the PSF.”
Since the mid-20th century, revenue from oil extracted from 16 miles of state-owned ocean floor off the Gulf Coast has also been funneled into the fund.
The foundation currently has $53 billion in assets and distributes about $2.2 billion annually to K-12 schools in Texas, according to its website.
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