Texas is taking steps that could cost BlackRock, UBS Group and eight other finance firms business with the state after finding them to be hostile to the energy industry.
Glenn Hegar, the Republican state comptroller, on Wednesday
The comptroller
The survey was triggered by a
The announcement is the latest salvo in Republicans' escalating fight against financial companies that have stepped into political and social issues. On Tuesday, Florida Governor Ron DeSantis eliminated ESG considerations for the state's pension funds, passing a
"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 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
The other companies on the list are BNP Paribas, Credit Suisse Group, Danske Bank, Jupiter Fund Management, Nordea Bank, Schroders, Svenska Handelsbanken and Swedbank. In addition, the comptroller's office also designated nearly 350 funds that are subject to the same investment bans.
BlackRock, the world's largest asset manager, said in an emailed statement that the company disagrees with the comptroller's assessment.
"This is not a fact-based judgment," the statement said. "BlackRock does not boycott fossil fuels — investing over $100 billion in Texas energy companies on behalf of our clients proves that. Elected and appointed public officials have a duty to act in the best interests of the people they serve. Politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees is not consistent with that duty."
A spokesperson for UBS said the company also disagrees with the decision. "We provided their office with extensive information on our policies and practices, demonstrating that UBS does not boycott energy companies even under a broad interpretation of Texas law," the statement said.
A Schroders spokesperson said the company doesn't boycott fossil fuels and has $19 billion allocated to companies active in the energy sector globally.
A Credit Suisse representative said the company would look to engage with the comptroller to resolve the matter, saying it doesn't boycott the energy industry.
"As we noted in our response to the Texas comptroller, Credit Suisse is not boycotting the energy sector as the bank has ongoing partnerships and strong client relationships in the energy sector," the statement said.
Spokespeople for BNP, Danske, Jupiter Fund Management, Nordea, Svenska Handelsbanken and Swedbank didn't respond to requests for comment.
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. Within 30 days, state entities like pensions will be required to notify the comptroller of any holdings on the divestment list.
The list may be modified and the comptroller's office said it will review information on an ongoing basis.
ESG shift
The dustup has its roots in a shift by some asset managers and banks to prioritize policies that take ESG factors into account. The firms say they're simply responding to customer demand for 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."
BlackRock told Hegar in a May letter that it's committed to helping clients invest in the energy industry. The firm said it oversees about $310 billion of investments in energy firms worldwide, including in Texas companies.
The money manager landed on the list after being targeted by conservative lawmakers from a bevy of states. In August, 19 state attorneys general, including Texas's,
It's unclear how the list will impact firms currently doing business with Texas. For one thing, there's an exception written into the new law that says pensions aren't required to divest from the banned companies if doing so would hurt their performance.
The law, Senate Bill 13, bars governments from entering into contracts of $100,000 or more with companies unless the firms verify that they don't boycott the energy industry. There are exemptions for that portion of the law, too. Municipalities can sidestep it if they determine that compliance would violate the government's constitutional or statutory duties related to the sale of debt or management of funds.
Some Texas muni issuers have already been skittish toward companies caught up in the comptroller's probe. The state's public-finance market, one of the nation's biggest, has also been roiled by a separate GOP-backed law targeting Wall Street for taking on policies around firearms. Bank of America, Goldman Sachs Group and JPMorgan Chase haven't underwritten a municipal bond deal by the state or its municipalities since the gun law took effect in September.
Texas isn't alone in attempting to punish Wall Street for pursuing ESG-focused initiatives.
States including Oklahoma, West Virginia and Kentucky have passed legislation this year targeting companies that engage in "boycotts" of the oil and gas industry. In July, West Virginia said it wouldn't award state banking contracts to five firms: JPMorgan, Wells Fargo, Goldman Sachs, BlackRock and Morgan Stanley.
— With assistance from Silla Brush.
