Something’s rotten in the State of Texas. Once self-styled as a bastion of free markets and friendly regulation, a down-ballot politician now wields the power of the State purse to whack companies into submission for not toeing the party line.
Texas Comptroller Glenn Hegar recently announced an “initial” list of 10 financial services firms, along with 350 investment funds, whose environmental, social & governance (ESG) sins were so egregious that the firms are now listed next to known terrorist organizations on the State’s Divestment Statute. Hegar’s 10 Most Naughty included nine European and UK-based firms, but one US asset manager sat conspicuously atop – BlackRock. The charge? “Boycotting Energy Companies.”
Now state government agencies must notify Hegar personally of the listed financial companies in which they may have direct or indirect holdings. The Comptroller may be surprised at the push back from State pension funds who take their fiduciary duty seriously and on average voted 90% of the time in favor of ESG resolutions – more often than BlackRock.
As if Hegar’s demands didn’t upend the normal course of business enough, he says “the list may be subject to change as often as quarterly.”
In March, Hegar sent a foreboding public letter to 19 financial institutions that essentially asked them to bend the knee and answer for their purported ESG sins. If asset managers did not respond to Hegar’s letter they would be “presumed to be boycotting energy companies.”
As any climate activist will tell you, BlackRock is the world’s leading investor in energy companies – to the tune of $310 billion with $115 billion in Texas fossil fuels alone. This makes the asset manager the largest investor in the state’s oil and gas industry. Not to mention the $290 billion that BlackRock has invested in Texas companies overall.
In a response to being put on notice, BlackRock struck a defiant posture: “The money we manage… belongs to our clients, who choose their own investment strategies and products from our broad product offering.”
To Hegar, BlackRock servicing its clients’ diverse needs is a ‘’duplicitous scheme.”
BlackRock in the Crosshairs
Hegar seems to have missed the most obvious data point of all – nobody invests more in Texas’ fossil fuel economy than BlackRock. And according to BlackRock’s communiqué with Hegar, its positions in fossil fuels in the state continue to grow.
So why the theatrics? Is Glenn Hegar’s 10 Most Naughty list an election-year stunt? A bizarre attempt to protect the Texan oil industry from its biggest investor? Or is the real reason unspoken?
Mr. Hegar is the latest anti-ESG crusader intent on publicly humiliating BlackRock. He forced the firm to highlight information, even if it was already public, that no doubt will disquiet many of its clients who believe climate risk is investment risk. Even the openly anti-ESG, pro-fossil fuel asset manager, Strive Funds, had to acknowledge in the prospectus of its oil-spill-of-an-ETF that the fossil fuel industry may end in “obsolescence.”
Hegar has pulled a DeSantis, abusing his political platform to besmirch the reputation of a major American company to fuel his up-ballot aspirations. Their unspoken message: the big government GOP elephant can stomp on your business and destroy your market value at will, regardless of the costs to companies and taxpayers. This blending of state and markets screams of government overreach.
“A Political Agenda Shrouded in Secrecy”
Hegar is hellbent on destroying all things related to ESG, which he says is how companies push “a social and political agenda shrouded in secrecy.” ESG is a risk assessment tool, so to be anti-ESG is to be anti-risk assessment. And to be anti-risk assessment can cause substantial losses for clients’ savings and is clearly a breach of Hegar’s fiduciary duty. Anyway, how can public data be “shrouded in secrecy?”
This ominous language is part of a larger movement to paint BlackRock, especially Larry Fink, as the head of a “global elitist” “cartel” aiming to “destroy the economy” and control “every aspect of our lives.” The conspiracy has a name: “The Great Reset,” and is promoted by the likes of Alex Jones and Vivek Ramaswamy. It is a continuation of an age-old antisemtic trope about the Jewish banker taking over the world.
“I had the privilege of providing opening remarks for Vivek Ramaswamy,” Mr. Hegar tweeted from the American Legislative Exchange Council’s annual conference in July.
Mr. Ramaswamy, the Alex Jones of Investing, is the CEO of Strive Funds, which he founded to replace BlackRock and Larry Fink, the Jewish “Benedict Arnold” of his alleged “global elite” conspiracy. While not all promoters of “The Great Reset” are antisemites, some have no qualms promoting these divisive and racist conspiracies for personal gain.
These Infowars-inspired tactics are key to accomplishing, through the backdoor of politics, what cultural warriors like Ramaswamy and Hegar could not otherwise accomplish in the free market. But at what cost to Texans?
Paying the Piper for Political Theater
Hegar claims the process of choosing Texas’ 10 Most Naughty was “open and transparent,” but perhaps the point of his fake dog and pony show was to make room for a more politically useful “anti-ESG” replacement for BlackRock.
Strive Funds, no doubt, is chief among Hegar’s suitors after Ramaswamy’s election year support. If Strive’s first ETF is an indication, Texans can expect to pay at least double the management fees currently paid for comparable funds. Strive has several new funds in the works and is aiming to eventually service state pensions.
Texas is already paying the price for Mr. Hegar’s heavy-handed government overreach. In March, he used an “anti-ESG” law to eliminate competition for the State’s municipal bonds, resulting in an estimated cost of $532 million in additional fees in the first eight months alone. Money that could have otherwise been used for community projects like new schools or upgrading water systems.
Glenn Hegar boldly trades the life savings of the state’s firefighters and teachers to boost his election year visibility. But even the squandered tax money may pale in comparison to the reputational damage that Hegar and his allies have inflicted on Texas.
Texas Now An “Uncompetitive State”
What happens next time a CEO uses her first amendment right to speak out about climate change or social injustice? Will she be listed next to known terrorists on Hegar’s list? Will she need to atone by wearing a scarlet A?
Baselessly boycotted and singled out for public shaming, BlackRock struck back by correctly labeling Glenn Hegar, Texas’s highest ranking financial representative, as “opportunistic”, “anti-competitive,” and “bad for business.”
Mark McCombe, the head of BlackRock’s US business, also asked, “Do other companies want to be doing business in a state where the rules can change around you? Is this the thin edge of the wedge?”
Another BlackRock representative pointed out the dereliction of duty inherent to schemes like Hegar’s, saying, “Elected and appointed public officials have a duty to act in the best interests of the people they serve. Politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees is not consistent with that duty.”
If the anti-ESG crusaders have their way, the retirement funds of public employees from West Virginia to Arizona will soon be managed by minions of risk-denying down-ballot bureaucrats, conspiracy theorists, and grifters like Ramaswamy.
Now is a critical time to ensure that doesn’t happen.