Texas’ Employee Retirement System (ERS) is moving some employee accounts to BlackRock despite a potentially unlawful relationship between the organizations, which The Dallas Express previously reported on.
Texa$aver, the 401k and 457(b) retirement program for state employees, recently announced in a newsletter that the administrator of the Texa$aver program “will transfer any account balance and future investments you may have in the AllianceBernstein All Market Real Return I Fund to the BlackRock Short Term Investment W.”
Documents obtained in a previous investigation by DX reveal that this will amount to roughly $3.5 billion in the 401k program and about $2 billion in the 457b. This migration will enrich BlackRock to the tune of about $5.5 billion in assets.
Extant BlackRock investments were over $1 billion in the 401(K) and around $750 million in the 457(b) at the end of 2023, DX previously reported. A shifting of assets of this magnitude would roughly quadruple the financial ties between the Tex$aver program and one of the state’s most embattled corporations. Records indicate this will affect about a thousand public employees’ investments.
The reason given for this change was purely financial:
“The Employees Retirement System of Texas (ERS) regularly reviews and periodically changes the investment options offered in the Texa$aver program. These updates ensure a diverse, low-cost array of investment options,” the newsletter said.
This move comes as numerous state entities have divested from BlackRock to comply with SB 13. Passed in 2021, SB 13 is also known as the Investment Protection Act. The law forbids state or local entities in Texas from investing in or having their assets managed by companies that discriminate against Texas oil and gas producers.
After the bill’s passage, State Comptroller Glenn Hegar identified BlackRock as discriminating against Texas energy producers.
BlackRock is a prominent proponent of the environmental, social, and governance (ESG) investment strategy. ESG is a type of activist investing that tries to create social or political change as much as it generates profit.
BlackRock had previously announced a move away from fossil fuels and toward alternative energy sources as part of its Climate Action 100+ agenda. As DX reported, the multinational asset manager has since shrunk this program, and BlackRock executive Mark McCombe told the Financial Times, “We have never turned our back on Texas oil and gas companies.”
Nevertheless, divestment efforts have continued to mount as state officials remain unconvinced that BlackRock’s investment strategy does not discriminate against a major Texas industry. The public school teachers’ pension, the largest such pension in Texas, led the divestment charge by dropping more than $500 million worth of investments in BlackRock over concerns about SB 13, The Dallas Morning News reported earlier this year. Other entities have followed suit.
The Texas Permanent School Fund (PSF) similarly broke ties with BlackRock.
“The Texas Permanent School Fund (PSF) has a fiduciary duty to protect Texas schools by safeguarding and growing the approximately $1 billion in annual oil and gas royalties managed by the Texas General Land Office,” State Board of Education Chairman Aaron Kinsey said in a March 19, 2024 statement announcing the sovereign wealth fund’s divestiture.
Kinsey added his belief that firing BlackRock was mandated and in “full compliance with Texas law,” as the “relationship with BlackRock was not in compliance with Texas Government Code Section 809, commonly referred to as Senate Bill 13.”
BlackRock responded that it was not forewarned of this decision before it was announced. However, subsequent reporting by consumer protection advocate Will Hild, executive director of Consumers’ Research, stated: “We’ve found proof that [BlackRock] lied in their letter to the Texas Permanent School Fund, following the fund’s divestment of $8.5 billion … You’ll want to see this.”
Hild laid out numerous videos demonstrating that BlackRock was notified of PSF’s dissatisfaction and contemplation of divestment around a year before any action was taken, DX previously reported.
Not all government entities have severed ties with BlackRock, though. Documents obtained by The Dallas Express reveal that the 457(b) program for employees of The City of Houston still has huge investments in BlackRock.
DX reached out to the mayor and numerous members of the city council seeking answers on why the self-proclaimed “Energy Capital of the World” would maintain a relationship with BlackRock, but none responded to requests for comment by the publication deadline.
