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The state’s comptroller has deemed the Wall Street titans to be hostile toward the fossil fuel sector.
Texas banned BlackRock Inc., UBS Group AG and eight other finance firms from working with the state after finding them to be hostile to the energy industry.
Glenn Hegar, the Republican state comptroller, on Wednesday named the firms he will prohibit from entering into most contracts with the state and its local entities after his office found they “boycott” the fossil fuel sector. The move ends roughly six months of suspense that cost banks business as Texas municipal-bond issuers avoided firms whose status was unclear amid the probe.
The comptroller sent inquiries to more than 150 companies in March and April, requesting information on whether they were shunning the oil and gas industry in favor of sustainable investing and financing goals.
The survey was triggered by a GOP-backed state law that took effect Sept. 1, 2021, and which limits Texas governments from entering into certain contracts with firms that have curbed ties with carbon-emitting energy companies. Texas is the nation’s top producer of crude and natural gas.
“The environmental, social and corporate governance movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy,” Hegar said in a statement.
Other companies on the comptroller’s list include BNP Paribas SA, Credit Suisse Group AG, Danske Bank A/S, Jupiter Fund Management Plc, Nordea Bank ABP, Schroders Plc, Svenska Handelsbanken and Swedbank AB.
State pension funds including the Teacher Retirement System of Texas will be required to divest from the companies, though the law includes exceptions, according to Hegar. The list may be modified and the comptroller’s office said it will review information on an ongoing basis.
The dust-up has its roots in a shift by some asset managers and banks to prioritize policies that take into consideration environmental, social and governance considerations. The firms say they’re simply responding to customer demand for so-called ESG strategies intended to do good for the world while also enriching investors. Because of their contributions to pollution and greenhouse gases that help fuel climate change, oil and gas companies are often excluded from ESG funds.
Dozens of firms defended their policies in responses to Hegar’s survey, saying they don’t boycott the energy industry but are required to act in their customers’ interests.
Hegar said in a statement that financial institutions are guilty of “doublespeak,” as they “engage in anti-oil and gas rhetoric publicly yet present a much different story behind closed doors.”