Documents obtained in an investigation by The Dallas Express reveal deep ties between a major city in Texas and one of the state’s most embattled corporations.
Houston’s defined 457(b) contribution program for public employees has reportedly invested substantial sums in BlackRock entities, including international, large- and small-cap funds. The city’s five-year returns have been mixed, with BlackRock funds consistently falling toward the middle or bottom of several investment funds.
Records obtained by DX only go back to 2022 and do not reveal the total number of investments. Therefore, it is unknown when the connection between the City of Houston and BlackRock truly began or the full extent of the relationship.
The legality of these investments is similarly unclear. In recent months, BlackRock has become the focus of divestment from many Texas governmental entities because of its alleged boycott of Texas’ oil and gas industry.
Houston is Texas’ oil capital, referring to itself as “the Energy Capital of the World” because of the localities’ “intellectual capital for virtually every segment of the energy industry including exploration, production, transmission, marketing, supply, and technology,” according to the Greater Houston Partnership website.
Houston’s connection with fossil fuel production runs so deep that the city’s former football team was named the Oilers.
This investigation echoes the results of a dive by DX that revealed billions of dollars of investments in BlackRock by the state employee-defined contribution programs. BlackRock comprised about a quarter of investments with the state’s Texa$aver 401(K) plan and a fifth of the 457(b) plan investments.
SB 13, sometimes called the Investment Protection Act, took effect in 2021. The legislation prohibits public organizations like state agencies and some statewide entities that service cities from investing in, having their investments managed by, or otherwise forming a contract with any company that discriminates against Texas oil and gas producers. Although Houston is not forbidden from investing in BlackRock under the bill, it does raise questions about the city’s financial connections with an institution state officials have identified as unlawfully discriminating against one of Houston’s major industries.
In a list authored by Texas State Comptroller Glenn Hegar, Hegar identified BlackRock as one of 10 firms allegedly violating SB 13. BlackRock had previously signaled a more aggressive Environmental, Social, and Governance (ESG) investment strategy that would have heavily prioritized alternative energy sources over fossil fuels as part of its Climate Action 100+ agenda, but as DX reported, it has since scaled back this program.
“We have never turned our back on Texas oil and gas companies,” BlackRock executive Mark McCombe previously told the Financial Times, vehemently denying BlackRock was boycotting Texas energy producers.
Nevertheless, some major state entities are cutting ties with the multinational corporation. The chairman of the State Board of Education (SBOE) recently announced that the Texas Permanent School Fund is terminating its investment with BlackRock, as DX reported.
“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,” Chairman Aaron Kinsey said in a statement on social media.
“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,” Kinsey added.
Kinsey noted that maintaining a relationship with the investment management firm would undermine the board’s responsibilities to Texans.
“BlackRock’s dominant and persistent leadership in the ESG movement immeasurably damages our state’s oil & gas economy and the very companies that generate revenues for our PSF. Texas and the PSF have worked hard to grow this fund to build Texas’ schools. BlackRock’s destructive approach toward the energy companies that this state and our world depend on is incompatible with our fiduciary duty to Texans,” wrote Kinsey.
However, not every current or former official may have felt this way. Despite the overwhelming support for PSF’s divestiture, some allege BlackRock had inside allies or agents. These allegations do not point to professional misconduct or unlawful activity. However, they do raise questions about certain high-ranking officials’ interests.
In 2023, Britt Harris was announced by the Texas General Land Office and SBOE as acting chief executive officer of PSF. Harris came to his position at PSF from his role as president and CEO of the University of Texas/Texas A&M Investment Management Company (UTIMCO).
When Harris was at UTIMCO, he directed the organization toward closer relationships with BlackRock. BlackRock CEO Larry Fink gave presentations to UTIMCO during Harris’s tenure, and Harris pushed to form a “strategic partnership” with the multinational corporation during the debut of UTIMCO’s strategic partnership program in 2008. This enabled BlackRock to manage $1 billion in UTIMCO assets.
Sources speaking on background to DX have alleged that Harris may be on BlackRock or one of their affiliates’ payroll. DX attempted to contact Harris for comment. However, his email bounced back, noting the recipient’s inbox was “full,” and phone calls went unanswered.
State legislators concurred with Kinsey. “I applaud the State Board of Education for deciding to redirect $8.5 billion of the Permanent School Fund away from BlackRock. Prioritizing investments that align with Texas’s interests, particularly our oil and gas industry, is crucial,” Rep. Nate Schatzline (R-Fort Worth) previously told DX about PSF’s divestments before encouraging more entities to take similar action.
“I encourage other state officials and agencies to follow suit, ensuring our state’s financial resources support our economic backbone and continued energy independence in Texas,” added Schatzline.
PSF’s actions reflected an earlier move by the state public school teachers’ pension. The fund, the largest in the Lone Star State, recently jettisoned more than $500 million worth of investments in BlackRock over similar concerns under SB 13, reported The Dallas Morning News.
DX contacted BlackRock, Houston’s mayor, and city council members but did not receive a response by the time of publication.
Note: This article was updated on April 11, 2024, at 2:37 p.m. to include additional information.
CORRECTION: This article was updated on May 7, 2024, at 8:30 p.m. to clarify that SB 13 does not prohibit municipalities from investing in or hiring companies that discriminate against Texas’ oil and gas industry.