Texas notified investment management company BlackRock on Tuesday that it plans to yank a $8.5 billion investment, citing the firm's "destructive" environmental, social, and governance push, Fox Business reported.

Texas State Board of Education Chairman Aaron Kinsey told the news outlet that the Texas Permanent School Fund, which has previously placed investments with BlackRock, will pull the funds. Kinsey explained that the move ensures the PSF, a fund created to support public schools, complies with state law.

The state passed Senate Bill 13 in 2021, prohibiting "investments in companies that boycott certain energy companies." The measure requires the state comptroller to maintain a list of investment firms boycotting fossil fuel energy companies. In November, Texas Comptroller Glenn Hegar announced the addition of five financial companies to the list.

"Texas has been a leader in calling out investment firms that have been playing politics with the retirement money of hard-working Americans. Our goal has always been to bring some honesty to what has really been a one-sided and intellectually dishonest discussion," Hegar stated at the time.

"I wanted to end the doublespeak by so many companies and show the critical impact that fossil fuels have on our daily lives," he added.

Fox Business reported that Hegar urged the PSF and five state pension funds to end their relationships with BlackRock.

"The Texas Permanent School Fund 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," Kinsey said Tuesday. "Terminating BlackRock's contract ensures PSF's full compliance with Texas law."

Kinsey argued, "BlackRock's dominant and persistent leadership in the ESG movement immeasurably damages our state's oil and gas economy and the very companies that generate revenues for our PSF."

He accused the company of having a "destructive approach toward the energy companies that this state and our world depend on [which] is incompatible with our fiduciary duty to Texans."

The $8.5 billion represents a significant portion of the PSF's $53 billion fund. Kinsey noted that the state and the PSF "have worked hard to grow this fund to build Texas' schools."

Texas' decision to pull the funds marks the largest divestment from BlackRock.

"Today represents a major step forward for the Texas PSF and our state as a whole. The PSF will not stand idle as our financial future is attacked by Wall Street," Kinsey remarked. "This bold action helps ensure our PSF remains in fact permanent and will continue to support bright futures and opportunities for generations of Texas students."

A BlackRock spokesperson told Fox Business, "BlackRock is helping millions of Texans invest and save for retirement."

"On behalf of our clients, we've invested more than $300 billion in Texas-based companies, infrastructure and municipalities, including $125 billion invested in the energy sector, including a $550 million joint venture with Occidental. We recently hosted an energy summit in Houston designed to explore how to strengthen Texas' power grid," the company added.

"Today's unilateral and arbitrary decision by Board of Education Chair Aaron Kinsey jeopardizes Texas schools and the families who have benefited from BlackRock's consistent long-term outperformance for the Texas Permanent School Fund," BlackRock continued. "The decision ignores our $120 billion investment in Texas public energy companies and defies expert advice. As a fiduciary, politics should never outweigh performance, especially for taxpayers."

Last year, BlackRock CEO Larry Fink declared that he would no longer use the "weaponised" term "ESG," stating that it has become too politicized on both sides of the aisle, Reuters reported. He noted he was "ashamed of being part of this conversation."

Arizona, Arkansas, Florida, Louisiana, Missouri, South Carolina, Utah, and West Virginia have made similar divestments.

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