BlackRock calls Texas ‘anti-competitive’ on ESG blacklist

BlackRock has spoken out against Texas’ decision to designate it as hostile to fossil fuels, calling the state’s targeting “opportunistic”, “anti-competitive” and “bad for business”.

The world’s largest asset manager was the only US company included by Texas comptroller Glenn Hegar on a list of 10 financial institutions that “boycott” fossil fuels. The groups face possible divestment by public pension funds.

“Trying to stop an American company from doing business in its own backyard is bad for business,” said Mark McCombe, BlackRock’s head of American affairs, who has made several trips to Texas to lobby state officials while the list was being developed. “It seems opportunistic in this climate.”

“We’ve never turned our backs on oil and gas companies in Texas,” McCombe said, noting that BlackRock is the largest investor in the state’s oil and gas industry and has $290 billion in assets. based in Texas. “It’s anti-competitive.”

None of BlackRock’s top fund management rivals were on Texas’ list, although most of them were included as sponsors of nearly 350 specific investment funds that the state also considers hostile to oil and gas.

The list stems from a 2021 Texas law that criticized environmental, social and governance-based investments for potentially harming the fossil fuel industry. The provisions force pension funds and school funds to divest themselves of shares they hold in financial groups that the government says are “boycotting energy companies”.

As a result, Hegar focused on publicly traded companies, which eliminated Vanguard and Fidelity. His office then relied on MSCI’s corporate ESG ratings to come up with a list of 19 target companies. That list included US banks JPMorgan Chase, Goldman Sachs and Wells Fargo as well as investment manager Invesco, but none made it to the final 10 list.

Hegar denied in an interview that the list was politically motivated. Companies on the initial list of 19 as well as the 150 behind specific investment funds were asked to explain their position on fossil fuels, he said. He added that some were able to provide information that assuaged the state’s concerns.

Those who did not respond and those who did not were included in the final list of 10, which included Credit Suisse, UBS and BNP Paribas, among others.

“The process was open and transparent,” Hegar told the Financial Times. “No matter what you do, you run the risk of being criticized.”

BlackRock has been targeted by top conservative politicians in Texas because founder Larry Fink has been outspoken about the need for businesses to fight climate change. Dan Patrick, the Republican lieutenant governor of Texas, wrote to Hegar in January asking him “to include BlackRock and any company like them.”

The financial groups on the list have 90 days to convince Texas to change its mind. State pension funds will then have to notify the comptroller of their holdings, but the law gives them some flexibility to sell if it affects their fiduciary duty to retirees.

McCombe said BlackRock plans to work with Hegar’s office to convince him to reconsider, and he said the group will continue to invest in the state and work with Texas-based clients.

But he warned the whole process was ‘not good for pensioners and business confidence. . . Texas prides itself on being a free market and open for business.

“Do other companies want to do business in a state where the rules can change around you?” He asked. “Is it the thin edge of the corner?”

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BlackRock calls Texas ‘anti-competitive’ on ESG blacklist

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