Sign up for The Brief, our daily newsletter that keeps readers up to date with the most essential news from Texas.
Texas has banned 10 financial firms from doing business with the state after Comptroller Glenn Hegar said Wednesday they don’t support the oil and gas industry.
Hegar, a Republican seeking re-election in November, banned BlackRock Inc. and other banks and investment firms — as well as some investment funds at big banks such as Goldman Sachs and JP Morgan – to enter into most contracts with state and local entities after Hegar’s office said the companies are “boycotting” the fossil fuel sector.
Hegar sent inquiries to hundreds of financial firms earlier this year to find out if they were shunning investments in the oil and gas industry in favor of renewable energy companies. The investigation was the result of a new Texas law that took effect in September that prohibits most state agencies, as well as local governments, from entering into contracts with companies that have severed their ties with carbon-emitting energy companies.
State pension funds and local governments issuing municipal bonds will have to divest from companies on the list, although there are some exemptions, Hegar said.
“The environmental, social and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interests of their shareholders or customers, but instead use their financial clout to push a social policy and political agenda shrouded in secrecy,” Hegar said in a written statement Wednesday.
New York-based BlackRock, which has publicly decided to invest more in renewable energy, criticized Hegar’s decision.
“This is not a judgment based on facts,” a company spokesperson said in a written statement. “BlackRock is not boycotting fossil fuels – investing over $100 billion in Texas energy companies on behalf of our customers proves it.
“Elected and appointed public officials have a duty to act in the best interests of the people they serve,” the spokesperson added. “Politicizing public pension funds, restricting access to investments and impacting retirees’ financial returns is inconsistent with this obligation.”
The other nine totally banned companies are: BNP Paribas SA, a French international banking group; Credit Suisse Group AG and UBS Group AG, based in Switzerland; Danske Bank A/S, a Danish multinational banking and financial services company; Jupiter Fund Management PLC, based in London, 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.
Funds within large companies target sustainable investing, such as Goldman Sachs’ Paris-aligned Climate US Large Cap Equity ETF and JP Morgan’s US Sustainable Leaders Fund.
Texas energy experts said the intent of the law, and Wednesday’s announcement, was to punish financial firms that don’t want to invest in the backbone of the Texas economy — oil and gas. gas.
“But at the end of the day, it’s all about rates of return,” said Ed Hirs, an energy economist at the University of Houston. “Quite honestly, fossil fuel companies, especially oil and gas companies, haven’t been doing very well in the (stock market) before this year.”
The Lone Star chapter of environmental group Sierra Club said “Hegar’s climate stunt will be costly for taxpayers”.
“Major financial institutions like those on this list are beginning to recognize that investing in fossil fuels carries significant risk in the face of an inevitable transition to clean energy, and that addressing the financial risks of the climate crisis is essential. to do good business,” said Sierra Club Fossil-Free Fundraising Campaign Manager Ben Cushing. continue to invest heavily in fossil fuels shows that this is nothing more than a political stunt at the expense of Texas taxpayers.”
James Coleman, professor of energy law at Southern Methodist University, said political pressures are driving both sides of this debate.
“Not just of those who hope to reign over fossil fuels, but also of those who fear that moving away from fossil fuels will be economic harm,” Coleman said.
But Coleman said “any time the state limits the potential world it can do business with, it potentially leaves returns on the table.”
The actual impact on Texas taxpayers is difficult to predict, said Felix Mormann, a professor at Texas A&M University School of Law who studies energy and climate change. He called Wednesday’s decision “a symbolic act by the controller to protest against the rise of ESG investing.”
“Will this announcement give oil and gas companies in Texas a boost? Morally, maybe,” Mormann wrote in an email to the Texas Tribune. “But, financially, Chevron, ExxonMobil and other oil and gas majors in Texas are playing in the global league… In other words, I highly doubt the controller will trigger the next oil and gas boom in Texas.”
As the political campaign heats up ahead of the November election, Hegar also this week accused Harris County of cutting spending on its constable offices, even though those offices would get a big boost to their budgets as part of of a proposed budget. Republicans used Hegar’s accusation to slam County Judge Lina Hidalgo, the county’s Democratic chief executive who is considered a rising star in the party, as she faces a re-election battle in November.
Last week, Hegar announced that he supported the repeal of Texas state taxes on menstrual products such as tampons and sanitary napkins, a position echoed by Gov. Greg Abbott.
Disclosure: Exxon Mobil Corporation, Southern Methodist University, Texas A&M University, Texas A&M University School of Law, and the University of Houston financially supported 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 journalism of the Tribune. Find a full list here.
The full schedule is now LIVE for the 2022 Texas Tribune Festival, taking place September 22-24 in Austin. Explore the timeline of over 100 insightful conversations coming to TribFest, including the inside track on the 2022 election and 2023 legislative session, the state of public and higher education at this point in the pandemic, why Texas suburbs are booming, why broadband access matters, the legacy of slavery, what really happened in Uvalde and much more. See the program.