APRIL 25, 2024

Advice to BlackRock: Attack the

problem, not your customer
By Harlan Crow, Robert B. Rowling and Dick Weekley

When Aaron Kinsey, chair of the State Board of Education, recently announced the Texas Permanent
School Fund would divest $8.5 billion from BlackRock Inc., the New York-based investment company
decided to attack its customer, publicly calling the decision “reckless” and “irresponsible.”

Newly-enshrined Texas law prohibits the state and the fund, which the State Board of Education
manages, from doing business with financial companies that boycott fossil fuels. Texas’ definition of
boycott includes “any action that is intended to penalize … a company” because of that company’s
production or use of fossil fuels. As required by the law, Texas Comptroller Glenn Hegar’s
investigation found that BlackRock does boycott fossil fuels.

This finding follows from BlackRock’s net-zero emissions commitments and its votes to penalize
directors for not reducing their companies’ emissions beyond what’s required by law.

After this finding, BlackRock could have changed its practices and refocused on fiduciary duty, but
instead, it continued to remain part of activist climate groups and push companies to phase out fossil
fuels. In response to the new law, school-fund officials carefully considered their options, invited a
BlackRock representative to speak about the issue, and followed the law.

The facts supporting the fund’s decision are clear. BlackRock is a member of an anti-fossil fuel
alliance called the Net Zero Asset Managers initiative. To join, BlackRock committed to use a clear
voting policy across all of its assets to achieve net-zero greenhouse gas emissions. This means
BlackRock promised to use its clients’ money, including school fund assets, to vote against directors
when a company isn’t phasing out fossil fuels.

Net zero is a radical goal that includes a dramatic worldwide reduction of natural-gas powered
electricity generation. In Texas, that would affect more than 44% of the electricity on the grid.

BlackRock has followed through on its net-zero promises many times. For example, BlackRock voted
against the directors at ExxonMobil, Woodside Petroleum, Whitehaven Coal and Air Liquide because
the companies weren’t demonstrating enough of a commitment to reducing emissions. For energy
companies, reducing emissions is basically promising to cut sales. This is because net-zero activists
count not just the energy company’s emissions, but also the final customer’s energy use as an
emission by the energy company.
BlackRock has also announced fossil fuel divestments that violate Texas law. In 2020, BlackRock said
that its active portfolios would divest from companies that derived more than 25% of their revenue
from thermal coal production. Since BlackRock’s announced divestment date of mid-2020, the price
of coal has nearly tripled, and many thermal coal producers have delivered impressive returns to
stockholders. But investors subject to BlackRock’s misguided policy missed out on these returns.

These are not isolated examples. BlackRock’s votes at annual corporate shareholder meetings would
shock most investors. Analysis by the State Financial Officers Foundation (SFOF), based on
BlackRock’s own SEC filings, found almost 600 instances in which a BlackRock fund voted in favor of
proposals from climate activist groups that sought to pressure companies away from fossil fuels. The
SFOF study could only find three instances in which BlackRock funds voted for pro-fossil fuel
resolutions.

SFOF’s study also shows that a BlackRock fund voted more than 170 times in favor of resolutions to
pressure companies to stop funding organizations with supposed pro-fossil fuel views, including the
U.S. Chamber of Commerce and SFOF. Punishing companies for working with organizations that
disagree with BlackRock’s position is an assault on the culture of open debate that is core to our
national character. Texans are right to feel betrayed.

There are numerous other examples of BlackRock’s actions against fossil fuels. For example,
BlackRock co-led a report that explained to financial companies how to use their ownership stakes in
energy companies to force those companies to phase out fossil fuels. This report specifically targeted
power plants that use fossil fuels, as well as gas pipelines and oil fields, all critical things for Texas.

BlackRock argues that because its funds have large holdings in energy companies, it doesn’t meet the
definition of a boycott under the law. This is a red herring. BlackRock sells investment products that
track an index, like the S&P 500. Energy companies are included in these indexes. So, of course
BlackRock owns shares in energy companies — they have to.

The authors of Texas’ new law had the foresight to recognize that the boycotting of fossil fuels
includes actions beyond just divestment. So, how BlackRock is using the shares it stewards also
violates the law.

A company in crisis can either attack its customers or attack the problem. Under Texas law,
BlackRock is clearly boycotting fossil fuels. Instead of blaming the Texas Permanent School Fund for
following the law, BlackRock should renounce its commitments to misuse client assets to push a
political agenda, and institute transparent safeguards that prevent the issue from ever re-emerging.
Only then can Texas and other investors feel safe allowing BlackRock to manage their funds.

Harlan Crow is an investor from Dallas. Robert B. Rowling is the chairman of TRT Holdings. Dick
Weekley is the chairman of Weekley Development Company.

We welcome your thoughts in a letter to the editor. See the guidelines and submit your letter here. If
you have problems with the form, you can submit via email at letters@dallasnews.com