A portion of the enormous pension fund held by the Teacher Retirement System of Texas has been divested from 10 financial institutions that the state comptroller singled out for “boycotting” the oil and gas sector.
Texas lawmakers forbade public funds from entering into contracts with or making investments in businesses that divest from the oil, gas, and coal industries in 2021.
Comptroller Glenn Hegar published a list of 10 investment companies and a number of funds in August that would be prohibited from conducting business with the state as a result of their attention to climate change in their investment practices.
The environmental, social, and governance, or ESG, strategies that attempt to account for the negative societal costs of investing in businesses that worsen climate change, use exploitative labor practices, or engage in corporate corruption, have gained more traction in recent years among financial institutions.
The executive director of the Teacher Retirement System, Brian Guthrie, wrote to state regulators in December to reassure them that the fund had sold its holdings in those firms in compliance with the legislation, including influential institutional investor BlackRock Inc.
Guthrie wrote in a letter on December 31 to Texas House Speaker Dade Phelan, Lt. Governor Dan Patrick, and Attorney General Ken Paxton, as first reported by Bloomberg Law, that “TRS does not hold any shares directly in the financial companies identified by the Comptroller as boycotting energy companies.”
The representative for TRS, Rob Maxwell, declined to comment on the overall dollar amount of the assets sold off from the fund.
About 2 Million Teachers Contribute To Pension Fund
The $173 billion teacher pension fund, which includes over 2 million active and retired educators from Texas, is open to members. According to a yearly survey by the journal Pensions & Investments, it is the sixth-largest such pension fund in the United States.
The $56 billion Texas Permanent School Fund, the largest K–12 fund of its kind in the United States, the $33.2 billion Texas Employees Retirement System, and the $35 billion Texas Municipal Retirement System are other state funds that must abide by the law.
The statute gave each fund the option to ask for an exemption if divesting would lower the fund’s worth. There was no exemption request from the Teacher Retirement System.
The fund did not own any securities from the named companies, according to a letter from the Texas Municipal Retirement System to Hegar from September that was obtained by The Texas Tribune. Requests for a response from the Permanent School Fund were not immediately answered.
In 2020, BlackRock attracted attention when its CEO urged other business executives to cut greenhouse gas emissions linked to their organizations’ operations that contribute to climate change. Texas Republicans viewed this call as an attack on the state’s influential oil and gas industry, making BlackRock a top target.
Dalia Blass, senior managing director and head of external affairs for BlackRock’s global executive committee, testified before Texas lawmakers in 2022 that the company has continued to invest in oil and gas despite its environmental commitments. According to Blass, BlackRock made an estimated $107 billion in Texas energy businesses during the most recent quarter.
Some investment firms have implemented ESG methodologies that rank businesses according to how much they contribute to societal issues like climate change. Some of these firms have also developed specific investment funds for clients who want to put money into funds that adhere to specific ESG standards.
According to research by the US SIF, an industry body that represents institutional investors with sustainability investments, ESG assets in the U.S. made up nearly 13% of all professionally managed assets last year and were valued at around $8.4 trillion.
BlackRock Inc., BNP Paribas SA, a French international banking group, Credit Suisse Group AG, UBS Group AG, Danske Bank A/S, a Danish multinational banking and financial services corporation, Jupiter Fund Management PLC, a fund management group with offices in London, Nordea Bank ABP, a European financial services group with offices in Finland, Schroders PLC, a British multinational asset management company, and Swedish Ban are the ten companies Texas has targeted for divestment. Additionally, the comptroller selected specific ESG-focused funds operated by bigger firms for divestiture.
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