The Texas Permanent School Fund has terminated its contract with investment giant BlackRock Inc (NYSE: BLK), pulling around $8.5 billion in state funds managed by the firm. The move stems from accusations that BlackRock is boycotting fossil fuel energy producers, a critical industry for the state of Texas.
Aaron Kinsey, Chair of the Texas State Board of Education which administers the school fund, said that the decision was made to comply with a 2021 Texas law. This law requires state agencies to divest from fund managers that reduce investments to cut greenhouse gas emissions.
Kinsey said the fund receives around $1 billion annually from the Texas General Land Office’s oil and gas holdings, representing an “existential long-term risk” if that income was disrupted.
While BlackRock has denied boycotting energy companies, asserting the $8.5 billion is minuscule compared to its $10 trillion in total assets under management, the allegations have sparked controversy. Several Republican-led states have scrutinized asset managers over environmental, social, and corporate governance (ESG) investing principles.
Related: Is ESG About To End? BlackRock CEO Abandons Term As It Became “Weaponized” Politically
“The decision jeopardizes Texas schools and the families who have benefited from BlackRock’s consistent long-term outperformance,” BlackRock said, also noting that the school fund’s decision disregards BlackRock’s $120 billion investment in Texas public energy companies.
The school fund still holds some illiquid BlackRock investments that will be phased out over time.
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