BlackRock urges Texas fund managers to reconsider after $8.5 billion divestment

By Isla Binnie

NEW YORK (Reuters) -A senior BlackRock executive said on Thursday the world’s largest asset manager was “dismayed” by a Texas state fund’s move to pull $8.5 billion in assets, and urged the fund’s administrators to reconsider.

Texas State Board of Education Chair Aaron Kinsey said on Tuesday the Texas Permanent School Fund (PSF) was terminating a contract with BlackRock, covering around 15% of its assets, to comply with a 2021 state law that curbed agencies’ business with financial firms accused of boycotting energy companies.

It was the latest broadside in a tussle between Republican state and federal officials and Wall Street firms over using environmental, social and governance (ESG) factors in investing.

BlackRock Vice Chairman Mark McCombe wrote to Kinsey on Thursday that the firm had generated $250 million for PSF since 2006 and repeated previous rejections of the allegation it discriminates against oil and gas firms.

“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,” McCombe wrote in the letter.

Kinsey said he made the move to fulfil his duty to manage money for the energy-producing state.

BlackRock said state law did not require the divestment because the funds’ outperformance showed “divestment would not be in the best interest of Texas PSF”.

Letters sent by PSF to BlackRock, dated March 19 and seen by Reuters, requested termination of contracts to manage investments in international equities and one specific fund, without giving a reason.

BlackRock had $10 trillion of assets under management at the end of 2023. McCombe said it had $320 billion in energy investments globally, and $120 billion in Texas-based public energy companies.

Just last month, Chief Executive Larry Fink appeared with Texas Lieutenant Governor Dan Patrick at an event in Houston aimed at stoking investment in the state’s power infrastructure.

(Reporting by Isla Binnie; Editing by Franklin Paul and Daniel Wallis)