Texas Removes BlackRock From Investment Blacklist

State entities are required to divest their investments from listed companies.

The BlackRock logo outside of its offices in New York on Jan. 18, 2012. Shannon Stapleton/Reuters

Texas Comptroller Glenn Hegar removed BlackRock Inc. from a list of financial companies banned from dealing with the state due to its boycott of the oil and gas sector, the Texas Comptroller’s Office said in a June 3 statement.

Texas passed Senate Bill 31 in 2021, prohibiting state entities from investing in financial companies that boycott energy businesses. In these cases, the financial organizations would refuse to deal with energy companies, terminate business contracts, and take actions that inflict economic harm on the companies.

In 2022, Hegar wrote to more than a dozen international financial companies, including BlackRock, to clarify their policies regarding fossil fuel investments. He eventually prepared a list of financial companies that boycott energy businesses, which included BlackRock.

If a company is added to the list, state entities—like the Teacher Retirement System of Texas, Texas Emergency Services Retirement System, and Texas Municipal Retirement System—with investments in the company would now be required to divest from it.

Hegar’s latest statement said BlackRock has been taken off the blacklist.

“BlackRock was delisted in part because it stepped back from full participation in the Climate Action 100+ and completely exited the Net Zero Asset Managers initiative.”

Climate Action 100+ is “an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take appropriate action on climate change,” according to its website. BlackRock withdrew from the initiative in February last year, citing the need to protect the interests of its clients whose money it manages.

The Net Zero Asset Managers initiative is a group of international asset managers committed to supporting investments aligned to achieve net-zero emissions by 2050. BlackRock exited this UN-backed initiative in January this year. At the time, the company said its participation in the initiative had resulted in legal inquiries from public officials.

In addition to pulling out from Climate Action 100+ and Net Zero Asset Managers, BlackRock also “dramatically reduced” the number of investment funds it offers that prohibit investments in oil and gas sectors, Hegar said.

BlackRock “has acknowledged the real social and economic costs, both here in Texas and globally, that come from limiting investment in the oil and gas industry,” he added.

BlackRock Lawsuits

In November, Texas and 10 other Republican states filed a lawsuit against asset managers BlackRock, Vanguard, and State Street, accusing their actions of hampering coal production and leading to higher energy prices.

“BlackRock, Vanguard, and State Street formed a cartel to rig the coal market, artificially reduce the energy supply, and raise prices,” state Attorney General Ken Paxton said in a statement. “This is a stunning violation of State and federal law.”

Paxton said that Texas “will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda.”

The allegations were rejected by BlackRock.

In a letter to shareholders, CEO Larry Fink said the company has “never supported divesting from traditional energy firms.” He highlighted that BlackRock had invested over $300 billion in client funds in traditional energy companies.

“If they want to invest in hydrocarbons, we give them every opportunity to do it—the same way we invest roughly $138 billion in energy transition strategies for our clients,” Fink wrote. “That’s part of being an asset manager. We follow our clients’ mandates.”

Last month, the Federal Trade Commission and the Department of Justice filed a “statement of interest” in the case supporting the stance of the states.

“Asset managers and institutional investors may be held liable under Section 7 of the Clayton Act when they use their stock holdings in multiple competitors to achieve anticompetitive goals,” they said.

The Clayton Antitrust Act of 1914 prohibits unethical corporate behavior such as price fixing or predatory pricing policies.

Earlier in January, BlackRock settled a lawsuit with Tennessee that accused the company of failing to adequately disclose the extent to which its investing activities were influenced by environmental, social, and governance considerations.