The Texas Permanent School Fund Corporation (Texas PSF) has issued a letter to BlackRock Investment Management, terminating its role as the investment manager for $8.5 billion of PSF funds that support Texas public schools. The decision is in line with a 2021 Texas law mandating state agencies to divest from investment firms that boycott energy companies under environmental, social, and governance (ESG) policies.
The Texas PSF was established by the Texas Constitution in 1845 to support public schools in the state. In 1876, the income from certain lands was dedicated to the PSF by the Texas Constitution. The fund is currently overseen by a nine-member board, chaired by Tom Maynard.
According to Robert Borden, CEO of Texas PSF, BlackRock was informed via a letter dated March 19 that its contract would be terminated effective April 30. A subsequent news release from the Texas PSF stated: "In addition to the Corporation’s compliance with Senate Bill 13 passed during the 87th Texas Legislature, Texas PSF has been divesting itself of assets managed by investment management firms that boycott energy companies while continuing to meet its ongoing fiduciary responsibility to maximize returns for Texas public schools."
Texas PSF Letter to BlackRock
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Richard Morrison's paper on ESG for the Competitive Enterprise Institute argues that advocates for ESG investing are "inspired by progressive political goals" and believe "for-profit corporations should not limit themselves to seeking profits for their shareholders, but should engage—or be required to engage—in various sorts of activism to address social problems and concerns."
Morrison also pointed out that "the ESG framework has been embraced by government agencies, quasi-government entities such as those affiliated with the United Nations, non-profit advocacy groups, financial ratings firms, and influential policy organizations like the World Economic Forum."
The Texas' ESG law was established through the passage of Senate Bill 13. The legislation "requires the Comptroller of Public Accounts of the State of Texas to prepare and maintain a list of all financial companies that refuse to deal with, terminate business activities with, or otherwise take any action that is, solely or primarily, intended to penalize, inflict economic harm on, or limit commercial relations with a financial company because the company engages in the exploration, production, utilization, transportation, sale, or manufacturing of fossil fuel-based energy and does not commit or pledge to meet environmental standards beyond applicable federal and state law."
