Texas Threatens Ban On Doing Business With BlackRock, Other Financial Firms With ESG Policies
Texas could move to bar BlackRock and nine European financial firms from doing business with the state due to policies the state deems unfriendly to its energy industry.
Texas Comptroller Glenn Hegar published a list Wednesday calling out the world's largest asset manager and companies like Credit Suisse and BNP Paribas for holding environmental, social and corporate governance policies that effectively boycott energy companies.
The list, which also includes 350 individual funds, follows a Texas law passed last year requiring state agencies not to do business with companies it deems anti-energy industry or explain their relationships if they choose not to divest, per Reuters. It also comes amid a growing right-wing backlash against ESG policies that have been embraced by the commercial real estate industry, among others.
Under the Texas law, state funds like the $200B Teacher Retirement System will be required to report what funds are tied to BlackRock and other listed firms.
In a release, Hegar said the move isn't meant as a review of the ESG movement but to put the focus on financial companies accused of boycotting energy companies and increase their transparency.
“The lack of transparency in the sector added to the challenge we faced in gathering the necessary information, and I recognize that there will likely be disagreements concerning whether a particular financial company is a suitable candidate for listing,” Hegar said in the release. “We will continue to refine this process and gather additional information about how these firms may be boycotting energy companies."
The new Texas laws, Senate Bills 13 and 19, are intended to protect Texas' oil and gas companies, as well as firearms companies.
At least one report shows cutting out companies can come at a cost for Texas.
Because cities can no longer use financial institutions with ESG policies as municipal bond underwriters, JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America and Fidelity left the market last year, according to a report by the Wharton School at the University of Pennsylvania. The move will cost Texas cities between $303M and $532M in interest on $32M in bonds, according to the university's research.
Other Southern states, including Oklahoma, West Virginia and Arkansas, have implemented similar regulations intended to retaliate against Wall Street policy stances.
“I think it does have a chance of becoming more common going forward,” Wharton assistant finance professor Daniel Garrett said in the report, adding that since interstate banking deregulation, states have few tools to punish banks, "and that’s why the public finance space becomes really important for these social fights.”
Hegar's list doesn't include JPMorgan Chase, Wells Fargo or other large financial institutions, which lobbied to be excluded, Reuters reported.
Financial institutions deny they are boycotting energy companies, as BlackRock and other companies hold fossil fuel stocks, per Reuters. UBS Group AG and Credit Suisse Group said they disagree with their placement on the list.
"[The company is] not boycotting the energy sector as the bank has ongoing partnerships and strong client relationships in the energy sector," a Credit Suisse spokesperson told Reuters. "We look forward to engaging with the Texas comptroller to resolve this matter."
