BlackRock, the world's largest asset manager, is contesting Texas' move to withdraw approximately $8.5 billion from the Texas Permanent School Fund (PSF) due to what the state perceives as BlackRock's boycott of energy companies.

Texas State Board of Education Chairman Aaron Kinsey announced on Tuesday the PSF's decision to divest funds in compliance with a 2021 state law aimed at preventing public funds from being managed by financial institutions that boycott the oil and gas sector. Kinsey argued that BlackRock's stance toward energy companies contradicts the state's fiduciary duty to Texans.

In response, BlackRock's Vice Chairman Mark McCombe penned a letter to Kinsey expressing dismay over the decision. McCombe criticized the move as prioritizing short-term politics over long-term fiduciary responsibilities and urged reconsideration. He emphasized BlackRock's history of delivering strong investment performance for Texas PSF over nearly two decades, generating significant returns exceeding $250 million. McCombe disputed Texas' assertion that BlackRock boycotts oil and gas companies, citing compliance with relevant laws and highlighting the company's investments in Texas energy firms.

Moreover, McCombe pointed out that Senate Bill 13, referenced by Texas, allows government entities to refrain from divestment if it conflicts with fiduciary responsibilities. He argued that BlackRock's proven outperformance indicates that divestment would not serve the best interests of Texas PSF.

McCombe raised concerns about the lack of transparency surrounding Texas PSF's decision to terminate its 18-year partnership with BlackRock. He criticized the manner in which the decision was communicated, stating that BlackRock learned about it through a press release, rather than through direct communication. McCombe emphasized that ending such a longstanding and successful partnership in a hasty and irresponsible manner could negatively impact thousands of Texas schools and families.

Moreover, McCombe revealed that not all Texas PSF board members were informed of the decision before it was announced publicly, depriving them of the opportunity to ask questions or provide input. He stressed that decisions of this magnitude should be made transparently and collaboratively, rather than driven by political motivations.

McCombe concluded the letter by reaffirming BlackRock's commitment to the welfare of all Texans and urging a reconsideration of the decision to terminate the partnership. He emphasized the importance of preserving the productive and mutually beneficial relationship between Texas PSF, BlackRock, and the communities they serve.