Earlier this week, Texas AFT released a statement condemning Texas State Board of Education (SBOE) Chairman Aaron Kinsey’s unilateral decision to divest $8.5 billion in Permanent School Fund assets from wealth manager BlackRock, ostensibly in response to 2021’s Senate Bill 13.
On March 19, Kinsey issued a formal statement to BlackRock, one of several firms who manage our tax dollars contained in the Permanent School Fund, announcing that the SBOE would be withdrawing billions of dollars in assets. Kinsey’s cited reason for this abrupt divestment is that BlackRock’s “dominant and persistent leadership in the [environmental, social, governance] ESG movement” is a violation of state law. Kinsey further declared that ESG policies “immeasurably damage our oil & gas economy” that generate revenues for the PSF fund.
The law Kinsey refers to is Texas Government Code 809, amended by SB 13 (2021), which prohibits the state from investing with companies that “boycott energy companies.” Though the SBOE’s Committee on the Permanent School Fund did vote to divest from companies in violation of Ch. 809 nearly a year ago in April 2023, there was no specific directive to remove funds from this group nor does the law require such divestment. So, what spurred this very public announcement all these months later?
The announcement actually makes perfect sense when you consider the Texas Public Policy Foundation (TPPF) held its 2024 policy summit in Austin on March 20. We have written previously about the web of dark money flowing in and through TPPF and many of its board members (Tim Dunn, Doug Deason, and Kyle Stallings to name a few). Therefore, we should expect this type of virtue-signaling to the oil and gas industry during an election year and adjacent to an event where extremist right-wing power brokers are courting media and donations. However, this attention-seeking move has very real and dire consequences for the Permanent School Fund and, by extension, the 5.5 million children in our Texas public school classrooms.
According to the latest report from the Texas Education Agency, the PSF is valued at $53 billion. This fund is the collective endowment that all school districts and charters borrow against to build facilities across the state. The PSF also transfers a sizeable amount each year to the Available School Fund (ASF) that is sheltered for the purchase of instructional materials. The sudden removal of billions of dollars from BlackRock with no apparent plan for how to re-invest those funds, means 16% of the PSF is languishing in a holding pattern rather than earning additional monies that could and should be invested in Texas schools. One study, conducted on behalf of the Texas Association of Business Chambers of Commerce Foundation, found that these anti-ESG laws have already cost Texans $270 million and counting.
In a March 21 statement, BlackRock pushed back against this seemingly unilateral decision by Kinsey and accusing him of putting “short-term policies over [his] long-term fiduciary responsibilities.” The timing of Kinsey’s statement supports this barb. The statement also made clear that Kinsey may be speaking out of turn. Kinsey is just one member of the PSF Corporation board (Member Tom Maynard is the chair of the SBOE’s Committee on the PSF and a PSF Corporation board member). It remains unclear what, if anything, was communicated to the rest of the board before Kinsey’s announcement hit the media.
This entire dustup comes just weeks after BlackRock CEO Larry Fink shared the stage with Lt. Gov. Dan Patrick at the “Texas Power Grid Investment Summit” aimed at investment in more natural gas power plants. This may have been an attempt by Fink to get out of the SB 13 doghouse with Patrick. ESG policies, along with Diversity, Equity, and Inclusion policies, have become a favorite target of the right-wing movement on grounds that they promote “social engineering” and undermine free enterprise. Some online pundits have called out the performative nature of SB 13, noting that most major oil companies, including Pioneer and Exxon, have stated ESG policies. There is speculation that punishing asset managers like BlackRock allows leaders to score anti-ESG points without directly calling out the industry that donated more than $100,000 to Kinsey’s campaign alone and whose total contributions into Texas political races tops the hundreds of millions.
It should be said that not all of BlackRock’s investments align with the values of all Texans. While conservatives cite its ESG practices, environmentalists attack it for investment in fossil fuels and companies that are destroying rainforests. In the increasingly monolithic game of major fund investment, there are no simple answers to either side’s accusations. What is fundamental to the conversation is that we increasingly see state leadership acting at the behest of their investors — the billionaires who fund their campaigns — rather than in the best interest of their constituents. Texans want and deserve a government that will invest in the priorities of the average taxpayer — priorities like our public schools.