Texas Comptroller Removes BlackRock from State Contractor List After ESG Retreat
The Texas Comptroller, Glenn Hegar, has announced that BlackRock has been removed from a list of financial companies restricted as state contractors and investments due to its environmental, social, and governance (ESG) initiatives. This decision is seen as a victory for BlackRock CEO Larry Fink, even as the company remains a target of Texas's antitrust efforts.
BlackRock's ESG Retreat: A Turning Point for Texas
In 2022, Texas added BlackRock to the list of companies restricted from state contracts and investments under the state law SB13. The law requires state agencies to block and divest state investments in companies that harm or limit commercial relations with the fossil fuel industry, which is a significant economic driver in Texas.
Hegar stated that BlackRock's decision to step back from full participation in the Climate Action 100+ and completely exit the Net Zero Asset Managers initiative was a key factor in its removal from the list. Additionally, BlackRock's dramatic reduction in fund offerings that boycotted fossil fuel investments also contributed to this decision.
"We appreciate the comptroller's resolution of this matter," said a BlackRock spokesperson. "BlackRock is proud to help millions of Texans retire with dignity and, on behalf of clients, invests over $400 billion in corporations, local governments, energy infrastructure, and other private assets throughout the state."
Larry Fink's Disengagement from ESG Initiatives
The decision by BlackRock to retreat from its ESG initiatives is part of a broader trend under CEO Larry Fink. In June 2023, Fink publicly stated that he would cease using the politically sensitive acronym "ESG" because it had been "weaponized" by both the ideological right and left.
In January, BlackRock cut ties with UN-backed Net Zero Asset Managers Initiative, an environmental advocacy group that pledged net-zero carbon emissions by 2050. This decision was seen as a significant disengagement from ESG initiatives and a nod to growing bipartisan concerns over the financial giant's influence on US markets.
Texas Attorney General Ken Paxton's Antitrust Case
Despite Hegar's removal of BlackRock from the list, Texas Attorney General Ken Paxton is pushing ahead with an antitrust case against BlackRock, as well as two other US financial giants, State Street and Vanguard. The case alleges that these companies coordinated a "left-wing ideological" attack on US coal companies by pressuring them to cut coal production in key markets.
The complaint claims that large yet minority shareholders like BlackRock have more influence than their formal equity share. With this influence, they allegedly agreed to reduce output through commitments to carbon-reduction organizations like Net Zero Asset Managers Initiative and Climate Action 100+.
BlackRock's Response to Antitrust Claims
BlackRock has asked for a judge to dismiss the case and accused the administration of trying to "re-write" antitrust law under an "absurd" theory that coal companies conspired with them to reduce production outputs. The company also argued that forcing asset managers like BlackRock to divest from coal companies will harm their ability to access capital and invest in businesses and employees, leading to higher energy prices.
Conclusion
The removal of BlackRock from the Texas comptroller's list is seen as a victory for CEO Larry Fink, even as the company remains a target of antitrust efforts. The decision highlights the ongoing debate over ESG initiatives and their impact on US markets. As large financial institutions like BlackRock continue to navigate this complex landscape, it remains to be seen how these developments will shape the future of ESG investments and the role of institutional investors in shaping market trends.
The case against BlackRock and its rivals also underscores the ongoing tension between the growing demand for sustainable investing and the concerns over the potential consequences on energy prices. As antitrust efforts continue to unfold, one thing is clear: the debate over ESG initiatives will only intensify in the coming months and years.