Texas has blacklisted BlackRock Inc., BNP Paribas, UBS Group AG and other financial companies for allegedly boycotting the fossil-fuel industry, a move that could lead state pensions and other public entities to sell their shareholdings in those companies.
Texas Comptroller Glenn Hegar on Wednesday published a list of 10 financial companies and nearly 350 investment funds, an exercise mandated under a state law meant to punish Wall Street banks that have purportedly burnished their green image by turning away from oil and gas.
The law, which took effect in September 2021, requires Mr. Hegar to name financial institutions and funds that in his judgment refuse to do business with energy companies, and potentially divest from them. Governmental entities are required, with some exceptions, to divest from them if they stay on the list past certain legally mandated deadlines
In addition to banks and fund managers, Texas also identified specific funds that could be subject to a state-mandated sale, including funds controlled by investment powerhouses Fidelity Investments and Vanguard Group.
Texas is among several conservative-leaning states that are seeking to use the public purse to push against the environmental, social and governance, or ESG, movement. Energy is a mainstay of the state’s economy.
“The ESG 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,” Mr. Hegar said.
The Investment Company Institute, an investment industry association, said the move would hurt the financial prospects of the state’s pension recipients by limiting funds’ investment options.
BlackRock said the comptroller’s opinion wasn’t “fact-based,” noting that it has invested over $100 billion in Texas energy companies. UBS said it provided the comptroller with “extensive information” showing it doesn’t boycott energy companies even under a broad interpretation of Texas law.
Fidelity Investments declined to comment. BNP Paribas and Vanguard Group didn’t immediately respond to a request for comment.
Under the law, listed companies and funds first get a warning. If they continue to participate in what Texas deems a boycott of energy companies, state-controlled entities could be forced to sell their shares. The law allows for those divestments to take place over time and provides some carve-outs so the state doesn’t lose money.
A separate provision of the law forces financial companies that do business with state entities to certify they don’t boycott energy companies. A financial company’s inclusion on this list won’t block existing contracts including those to, for example, manage a pension fund’s investment.
Texas maintains several blacklists of entities marked for scrutiny under state divestment law. Apart from banks and funds that boycott energy companies, it has also targeted companies with ties to Iran, Sudan and foreign terrorists, along with companies that boycott Israel.
The state’s public pension plans are some of the largest in the U.S. For example, Teacher Retirement System of Texas, which provides retirement benefits for the state’s public school, college and university employees, held about $201 billion in assets as of the end of August 2021.
TRS holds about $28.2 million worth of BlackRock shares, according to S&P Global Market Intelligence, a data provider. That figure is dwarfed by the asset manager’s market capitalization of approximately $105 billion.
Mr. Hegar used publicly available ESG ratings, which rank companies as ESG leaders or laggards, as a starting point for his investigation, his office said. Financial companies that scored higher than their peers were investigated, along with those that had made climate-related commitments. He made final determinations on which companies made the shortlist after reaching out to the identified companies, according to his office.
Mr. Hegar said in a statement he was also looking into firms’ “misguided activism” in proxy voting on behalf of their clients, an area that has also drawn the attention of Republican senators.
thats up to the people in texas. texas could always create their own bank. get conservatives to fund it. and use that to fund energy projects.
or energy companies could just go to the bond market, and issue bonds. if they paid a good rate of return, people would be more than happy to invest in such bonds. you don't have to have blackrock, or ubs.