A March study by the Texas Association of Business and the consulting firm TXP concluded that laws meant to prevent ‘woke’ investment strategies in Texas cost the state $700 million in economic activity, but a countering report by the American Energy Institute has put the findings into question.
The new report from the American Energy Institute (AEI), a think tank with a pro-fossil fuel tilt, found methodological errors in the Texas Association of Business (TAB) study that allegedly skewed its findings. The AEI report says that the difference in weighting of some data sets from certain years produced the allegedly erroneous $700 million figure.
“Texas’ Bond Review Board (BRB) carefully tracks such costs each year, and their annual reports are the primary data source used for the TABCCF study,” AEI reported. “BRB used a different weighting scheme in its 2022 and 2023 reports compared to prior years. BRB corrected this error in a May update to those reports, but the author of TABCCF’s study, TXP, Inc., has not corrected its analysis.”
The original TAB-TXP study remains mostly unaltered on the TAB website, except for a brief disclaimer about halfway through that notes, “This information was based on data contained in the Local Government Annual Report series published on the Bond Review Board site at the time of the analysis,” and has since been updated. Similarly, segments of the report have been widely republished in other venues, including the websites Muni Credit News and Unlocking America’s Future.
“Further examination of transaction costs associated with issuing debt, specifically the underwriters spread, shows a sharp increase in the fiscal years 2022-23 in the wake of the law’s implementation,” one widely reshared section of the TAB report reads. “These funds are no longer available for the basic functions of government; … we are seeing a tightening of the competitive bond market in Texas due to enforcement actions pursuant to Texas’ 2021 Fair Access law, which could stall this significant progress.”
The Dallas Express received comment from TAB after publication. A spokesman for the group sent DX a statement that reiterated that the TAB-TXP report was produced with available data from the Bond Review Board at the time of first publication and that the main point of their findings remained unchanged.
“This does not change the fact that a tightening of the competitive bond market in Texas limits local governments’ access to financing for taxpayer-approved bonds, which ultimately results in more debt shouldered by taxpayers and Texas businesses, as multiple other economic analyses have similarly shown,” the statement read.
The Texas legislature passed SB 13 and SB 19 in 2021 to fend off the growing influence of the environmental, social, and governance (ESG) movement. ESG is a type of activist investing that seeks to promote left-wing social change through business ventures. At the time, numerous investment firms and asset managers were embracing ESG policies that were perceived as targeting the oil and gas industry, as well as the firearms industry.
BlackRock and its CEO Larry Fink were some of the most well-known proponents of ESG at the time of the bills’ passage. Fink promoted ESG during public appearances, and the company signaled an aggressive pivot away from fossil fuels and toward alternative energy sources as part of its Climate Action 100+ agenda.
The legislation prohibited many state entities from investing in or having their assets managed by any company deemed by the comptroller to be in violation of the law.
Under SB 13, Texas Comptroller Glenn Hegar identified BlackRock as one of 10 companies unlawfully discriminating against oil and gas producers in Texas. Numerous state entities subsequently made the statutorily required move to cut 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.
“Today, PSF leadership delivered an official notice to global asset manager BlackRock terminating its financial management of approximately $8.5 billion in Texas’ assets. Terminating BlackRock’s contract ensures PSF’s full compliance with Texas law,” he added.
The state public school teachers’ pension, the largest in Texas, also sold more than $500 million in investments with BlackRock over similar concerns resulting from Hegar’s SB 13 list, per The Dallas Morning News.
Since these state actions, BlackRock leadership’s tune has changed. In a recent earnings call with investors, Fink appeared to signal a reversal in his belief system, DX previously reported.
“Unfortunately, there are still others out there who put short-term politics, who continuously lie about these issues, they’re putting those issues above the long-term fiduciary responsibilities,” Fink said before adding, “As a fiduciary, politics should never outweigh performance.”
UPDATE: This article was updated at 9:35 a.m. on July 9, 2024, to include a comment from TAB.
