BlackRock to fund new Texas stock exchange as it tries to get in state’s good graces – Washington Examiner

The giant asset manager BlackRock’s efforts to start a new stock exchange in Texas may help it get back into the state’s good graces after highly publicized disputes with Republican officeholders over environmental, social, and corporate governance investing.

BlackRock’s plans to invest in the $120 million Dallas-based Texas Stock Exchange, which is meant to challenge the New York Stock Exchange and NASDAQ, represents the latest of several recent overtures to Texas Republicans after a spat over the role that ESG should play in the firm’s investment decisions. BlackRock stood to lose out dearly if Texas followed through on its threats to cut it off from business.

At its peak in 2023, the dispute over ESG investing became so heated that Texas Lt. Gov. Dan Patrick called for the state to “blacklist” firms such as BlackRock that prioritized ESG.

BlackRock has since backed away from using the term ESG altogether. Some view BlackRock’s decision to invest in a new Texas stock exchange as part of a larger campaign by CEO Larry Fink to mollify the state’s conservatives.

Helping finance the stock exchange represents the latest iteration of BlackRock “glad-handing Texas legislators and elected officials,” Will Hild, the executive director of Consumer Report, told the Washington Examiner in an interview.

BlackRock holds more than $320 billion in global energy investments, including approximately $120 billion investments in Texas-based publicly traded energy companies — meaning that a full boycott from Texas, if realized, could have proved punishing for the company.

BlackRock “is basically trying to mend fences right now without actually giving up any of the commitments they’ve made to the left,” Hild said.

Much of it will depend on how the exchange is created, and how closely the exchange hews to its goal of achieving a better operating environment than the NYSE or NASDAQ.

TXSE CEO James Lee told the Wall Street Journal this month that the exchange will seek to be “more CEO-friendly” than its New York alternatives and will operate in a more relaxed regulatory environment. The $120 million that the TXSE has already raked up in private funding will also make it the single largest entrant to register with the Securities and Exchange Commission, which it plans to do sometime this year.

“I’m cautiously optimistic” about the new Texas stock exchange, Hild said. “I’m hoping they look at what’s happening in NASDAQ and NYSE and say … ‘We are going to be what they used to be, but also with protections to keep us from getting veered into where they have now gone.’”

A tricky ESG history

Last summer, Fink backtracked on BlackRock’s ESG push, saying in a letter to investors that BlackRock would no longer use the politically charged acronym to guide investment decisions.

It also exited Climate Action 100+, an investor group of some 700 members focused on emissions reduction efforts.

BlackRock has also moved to give individual investors greater ability to decide how their share of funds would vote on the companies they own, an effort to push back on Republican criticisms that it was putting the thumb on the scale for ESG and curtailing shareholders’ power.

But at the same time, other moves were criticized. BlackRock’s decision to leave Climate Action 100+ came at the same time that its international subsidiary, BlackRock International, joined Climate Action 100+. The decision by its international subsidiary to join the group was praised by asset managers in Europe, including Faith Ward, a senior official at Brunel Pension Partnership, who said she was “delighted” by the decision.

But it prompted allegations of doublespeak, including by Texas Comptroller Glenn Hegar.

Officials in Democrat-led states, including New York, also criticized the partial withdrawal.

BlackRock did not respond to the Washington Examiner’s request for comment on its relationship with Texas leadership.

Still, the stock exchange venture is one of many overtures BlackRock has made to Republicans after the row with leaders in Texas and other Republican-led states.

Fink, in recent months, has pitched a reformulated approach of “energy pragmatism,” or the view that the world will need both renewable energy resources and fossil fuels to meet the dual priorities of decarbonization and energy security in the years ahead.

Fink first used the term in the asset management in BlackRock’s 2024 Letter to Investors this May, further signaling what could be seen as a more moderated public approach.

Other events appear to bolster this view: In February, Fink appeared at an event in Houston alongside Patrick, where he dubbed Fink the “king of Wall Street” and welcomed Fink’s offer to help the state secure up to $10 billion in private investments to support its aging power grid.

Fink, in return, touted the “commonality” they had found despite their differences.

“As a business leader and a leader of government, we saw that those differences can be minimized quite, quite quickly,” Fink told the audience, “and that there was a lot of commonality and a lot of same interests. And the same interest was how to build a stronger future for Texas.”

Public damage

Despite this public show of fence-mending, some level of reputational damage appears to have already been done.

In March, the Texas State Board of Education terminated an $8.5 billion investment with BlackRock —sparking criticism from the group, which noted that it currently manages the pensions of some 2 million residents in the state.

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Other states, such as West Virginia and Oklahoma, have also added BlackRock to their own list of companies viewed as hostile to the fossil fuel industry

Most recently, the House Judiciary Committee’s Republican majority published an interim staff report earlier this year blasting Climate Action 100+ and other groups as a “climate cartel” of left-wing activist groups and major financial institutions, which it accused of “colluding” to force participation on ESG investing, in a possible violation of federal antitrust law.