In a hearing the message was that their money is not welcomed if they abide by environmental standards.
By Chrysta Castañeda
Author’s note: This article was originally published in The Dallas Morning News on January 9, 2023.
A few weeks ago, the Texas Senate summoned representatives of some of the largest investors in Texas’ energy sector to Marshall for a public shaming. These investment firms back companies that employ thousands of our friends and neighbors and support nearly 10% of the state’s economy.
Rather than encourage these firms to invest even more in Texas, the Republican legislators spent nearly eight hours delivering the bizarre message that their money isn’t welcome here. You see, they don’t want these firms — which invest the pension dollars of Texas firefighters, teachers and first responders — to abide by the fiduciary standard that they are held to, simply because that fiduciary standard also tells them to invest in the planet’s future.
The fiduciary standard requires those who hold other people’s money to invest it in ways that maximize the return on that money without self-dealing. Although there are other nuances to the concept, the one that rankles Republicans is the fact that these fiduciaries also look at environmental issues. They’d rather not have the Texas oil industry subjected to sensible pollution goals, even though the Texas oil and gas industry itself says otherwise.
Back in Marshall, the Senate State Affairs’ hearing was full of surprisingly hostile and poorly informed accusations hurled at the investment firms’ witnesses. According to the testimony, BlackRock has invested $31 billion in the Texas energy industry in just the last two years and $107 billion in Texas public energy companies to date. This money helps more than 3.5 million Texans fund their retirements. Indeed, BlackRock is one of the biggest investors in Texas’ oil and gas industry.
Yet upon hearing the testimony, one committee member, state Sen. Lois Kolkhorst, said that they “have different goals” and that “it’s maybe time for us to take our marbles, go elsewhere.” Does she really think that driving some of the biggest investors out of the state, just because they adhere to the fiduciary standard, is actually good for Texas? Does she really think that state pension money will be better off in the hands of firms that do not follow the fiduciary standard? Recall that Bernie Madoff didn’t follow the fiduciary standard either, and likely did not have an environmentally sensitive investment plan. Running responsible investment firms out of the state — and jeopardizing the financial security of millions of Texans in the process — is a new low, even for the Texas Legislature.
Why did the committee schedule a show trial to berate these firms when their management of state funds is driving positive returns for Texas retirees? Because taking down the “woke agenda” is a political tool for these senators to stay in power and please their base voters. Some conservatives, here in Texas and around the country, are on the march against any investment strategy that looks to the future of energy. They fear that if these firms focus on investing in companies that value reducing pollution and creating cleaner energy, that will trigger the immediate downfall of the traditional oil and gas sector. Their fears are unfounded, but reality plays only a bit part in this political drama.
Sen. Bryan Hughes, the chairman of the committee, was clearly jockeying for pole position among the agitated conservatives. When told of BlackRock’s $27 billion investment in Exxon, he said that BlackRock making any investment in Texas oil and gas companies at all “is our concern,” adding, “we wish you weren’t there.” Because Exxon has a platform to clean up its oil and gas activities and the investment firms support it, our state senators would rather risk the pension funds of Texans. They’ll happily jeopardize billion-dollar investment decisions about Texas pensions for tweets and MAGA clout if they have their way with this issue.
The committee could have had an honest discussion about investment decisions. They could have asked the executives, who manage trillions in assets and billions of pension dollars across the globe, how they achieve their returns. As elected representatives of the people of Texas, they could have had a real conversation about how to ensure the long-term viability of the pensions entrusted to the state by millions of retired Texas police, nurses, teachers and other public servants.
Instead, the committee members spent a day congratulating themselves on their posturing and asking why Ron DeSantis’ Florida government — 700 miles east of where the hearing took place and far outside of the committee’s jurisdiction — had divested from some BlackRock funds.
With recent market fluctuations, a fast-growing state like Texas is in no position to send investments elsewhere. We need to keep our doors open and allow businesses to thrive here and hire here. Blacklisting investment firms, or any other company that does not perfectly align with the whims of conservative politicians, will only hurt the people they’ve been elected to represent: You.
Chrysta Castañeda is based in Dallas, where she is a lawyer and engineer with a deep understanding of energy operations, finance and markets. She was the 2020 Democratic nominee for Texas railroad commissioner.