Politicians should stop playing culture war politics with public funds
American Banker, Sam Raus
This month the State of Texas government terminated an $8.5 billion investment managed by BlackRock, the world’s largest asset management firm, over the company’s continued use of environmental, social and governance (ESG) standards. The investment came from the Texas Permanent School Fund, or PSF, which finances the state’s public school systems.
Accusing BlackRock’s investment strategies of discriminating against Texan oil and gas companies, as well as violating their fiduciary duty, the State of Texas continues its yearslong battle with America’s major financial institutions over ESG. The decision received an outpouring of support from Republican lawmakers and conservative groups, including the Heritage Foundation and Club for Growth.
Anti-ESG Texas politicians criticize BlackRock for politicizing investment strategies and neglecting its fiduciary duty. But, truthfully, they are the ones who prioritize performative virtue signaling and culture wars over the fiscal stability of Texas schools. By ignoring BlackRock’s superior performance and the basic principles of free-market capitalism, the Texas government enables empty claims about ESG standards and extends political polarization into the private sector.
Texas State Board of Education Chairman Aaron Kinsey ended the investment due to a 2021 state law targeting ESG-aligned business. The law prohibits state agencies from working with companies listed as refusing to manage investments for fossil fuel companies. However, as of 2022, BlackRock had reportedly invested $170 billion into American energy companies, including oil pipelines and power plants and strictly considers climate change impacts from a financial outlook. By all measures, BlackRock’s ESG standards align with their fiduciary duty.