Financial risk cited for cutting ties with BlackRock

State GOP blamed $8.5B decision on ‘woke indoctrination’

When Republicans announced that the state’s Permanent School Fund shed $8.5 billion worth of investments with BlackRock, they cast it as a rebuke of the financial giant’s “anti-Texas policies and woke indoctrination.” The decision was made, they said, to comply with a state law that bars business with companies that “boycott” fossil fuels.

But in reality, the move was largely a financial one unrelated to the controversial law.

The fund’s board voted last month to move investments away from foreign debt and an international index fund they deemed too risky, according to three members and a webcast of the meeting. BlackRock happened to manage both portfolios, Tom Maynard, the Permanent School Fund’s board chair and a Florence Republican, said Friday.

“If you drill down into it, that’s really the basis of the decision more than it being BlackRock,” he said.

The move is the latest dust-up between Texas and BlackRock as the state’s Republican leaders seek to punish companies they see as spurning fossil fuels, gunmakers and other industries they support.

The decision to cut ties with the financial company is unfolding in an election year at a time Republicans are eager to demonstrate their conservative bona fides. BlackRock, through its proliferation of environmental, social and governance investment policies — where broader social implications are considered alongside direct financial ones — has emerged as a frequent target of conservative criticism.

The school fund decision was made during a three-hour, 17minute meeting in February in which the fund’s board made routine decisions about how to

manage its investment strategies.

After a lengthy slideshow presentation from the CEO of the fund, board members decided to move investments away from foreign debt — which they viewed as too risky, given international instability — and instead into private credit funds. It was a cut-and-dry decision based on 10-year financial projections, they said. One member who was at that meeting, Fort Worth Republican Pat Hardy, said last week that she did not recall the word “BlackRock” being uttered.

But when the decision was announced, Maynard described the move in a news release as an effort to fight “anti-Texas policies and woke indoctrination” that “have no place in Texas public education, whether in the classroom or as investments in Texas Permanent School Fund.”

Aaron Kinsey — chair of the State Board of Education, whose members help oversee the fund — said on social media that the decision was made “through his leadership” to comply with the controversial 2021 state law, known as Senate Bill 13, which bars investments with companies that “boycott” oil and gas companies

BlackRock later said Kinsey’s tweet was how company leaders learned of the state’s multibillion-dollar decision, which the company criticized as “reckless,” and “irresponsible.”

Kinsey, a Midland oil and gas executive, took to Fox Business to defend it.

“Our duty is to execute the law,” he said. “Executing the law is not arbitrary.”

Kinsey declined an interview after a conference Thursday in Austin hosted by the conservative Texas Public Policy Foundation. He did not immediately respond to an emailed request for comment Friday.

BlackRock is included on a state-issued list of financial companies that are off limits for investments because they “discriminate” against the firearms industry, “boycott” fossil fuels or avoid doing business with Israel.

Several large Texas pension and investment funds — including the Teacher Retirement System — have divested their direct shares of BlackRock to comply with the law. But they still allow the company to manage billions of dollars of other investments.

BlackRock, whose leaders have denied claims they boycott energy companies, was sharply critical of the PSF decision. In an open letter Thursday, the company noted that it had outperformed financial benchmarks for the PSF since they began working together in 2006, generating an excess of more than $250 million.

“We fully comply with Texas law and fundamentally disagree with your assessment based on BlackRock’s performance for Texas PSF and our investments in Texas energy companies,” BlackRock Vice Chairman Mark McCombe wrote in the letter. “How our clients invest and whom they entrust to manage their money is entirely their decision, but we feel an action of this magnitude warrants transparency and consensus — not political-driven decision-making. Texas schools and families deserve that.”

Maynard said the Permanent School Fund was already in compliance with the law and the decision to withdraw funds from BlackRock management was primarily financial. But he said it was also an opportunity to “state our values” and “not only honor the letter of the law but the spirit and intent of the law.”

Asked why the news release presented the decision as about SB13 when he acknowledged it was a financial one, Maynard pointed to politics. “I don’t think that we started out that way. It’s just, I guess, the environment we’re in right now.”

Maynard faces a runoff election in late May against a wellfunded candidate for his seat: Mary Bone, a board member of Round Rock Independent School District.