The Teacher Retirement System of Texas was following a new state law targeting investment firms that seek to invest in companies that don’t worsen climate change.
The Teacher Retirement System of Texas has divested part of its massive pension fund from 10 financial firms that the state comptroller singled out for “boycotting” the oil and gas industry.
In 2021, Texas lawmakers prohibited state funds from contracting with or investing in companies that divest from oil, natural gas and coal companies. In August, Comptroller Glenn Hegar released a list of 10 investment firms and several funds that would be blocked from doing business with the state due to their climate-change-conscious investment strategies.
Financial firms in recent years have increased their commitments to environmental, social and governance — or ESG — strategies that attempt to account for the negative societal costs of investing in companies that worsen climate change, use exploitative labor practices or engage in corporate corruption.
In December, Brian Guthrie, the Teacher Retirement System’s executive director, wrote to state officials confirming that the fund had complied with the law by selling its shares in those companies — including powerful institutional investor BlackRock Inc.
“TRS does not hold any shares directly in the financial companies identified by the Comptroller as boycotting energy companies,” Guthrie wrote in a letter, first reported by Bloomberg Law, to Texas House Speaker Dade Phelan, Lt. Gov. Dan Patrick and Attorney General Ken Paxton on Dec. 31.
Rob Maxwell, TRS spokesperson, declined to comment on the total value of the assets divested from the fund.
Almost 2 million Texas educators and retirees participate in the teacher’s pension fund, which is worth about $173 billion. It’s the sixth-largest such pension fund in the U.S., according to Pensions & Investments magazine, which produces an annual analysis.
Other state funds bound by the law include the $56 billion Texas Permanent School Fund, the largest such K-12 fund in the U.S.; the $33.2 billion Employees Retirement System of Texas; and the $35 billion Texas Municipal Retirement System.
The law allowed each of the funds to request an exemption if divesting would reduce the value of the fund. The Teacher Retirement System did not request an exemption.
A September letter from the Texas Municipal Retirement System to Hegar, obtained by The Texas Tribune, said that the fund did not own any securities from the listed companies. The Permanent School Fund did not immediately respond to request for comment.
In 2020, BlackRock garnered global attention when its CEO called on other corporate leaders to reduce greenhouse gas emissions related to their companies’ operations that cause climate change — a move that made BlackRock a top target of Texas Republicans who saw it as an attack on the state’s powerful oil and gas industry.
During a 2022 hearing, Dalia Blass, senior managing director and head of external affairs of BlackRock’s global executive committee, told Texas lawmakers that BlackRock’s environmental initiatives have not stopped the firm from investing in oil and gas. BlackRock had invested about $107 billion in Texas energy companies in the most recent quarter, Blass said.
Some investment firms have adopted ESG strategies that grade companies on whether they contribute to societal problems like climate change, and some have also created specific investment funds aimed at clients who want to invest into funds that meet certain ESG criteria.
ESG assets in the U.S. accounted for about 13% of the total professionally managed assets last year, worth about $8.4 trillion, according to a report by the US SIF, an industry group representing institutional investors with sustainability investments.
The 10 firms targeted by Texas for divestment are BlackRock Inc.; BNP Paribas SA, a French international banking group; Swiss-based Credit Suisse Group AG and UBS Group AG; Danske Bank A/S, a Danish multinational banking and financial services corporation; London-based Jupiter Fund Management PLC, a fund management group; Nordea Bank ABP, a European financial services group based in Finland; Schroders PLC, a British multinational asset management company; and Swedish banks Svenska Handelsbanken AB and Swedbank AB. The comptroller also identified specific funds with an ESG emphasis that are managed by larger companies for divestment.
Disclosure: The Texas comptroller of public accounts has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
Photo: The Teacher Retirement System of Texas complex in downtown Austin. The massive pension fund says it has divested from investment funds that state leaders accused of “boycotting” oil and gas companies. Credit: John Jordan/The Texas Tribune
BY ERIN DOUGLAS with Texas Tribune.