It’s kind of amazing, actually.
Texas banned 10 financial firms from doing business with the state after Comptroller Glenn Hegar said Wednesday that they did not support the oil and gas industry.
Hegar, a Republican running for reelection in November, banned BlackRock Inc., and other banks and investment firms — as well as some investment funds within large banks such as Goldman Sachs and JP Morgan — from entering into most contracts with state and local entities after Hegar’s office said the firms “boycott” the fossil fuel sector.
Hegar sent inquiries to hundreds of financial companies earlier this year requesting information about whether they were avoiding investments in the oil and gas industry in favor of renewable energy companies. The survey was a result of a new Texas law that went into effect in September and prohibits most state agencies, as well as local governments, from contracting with firms that have cut ties with carbon-emitting energy companies.
State pension funds and local governments issuing municipal bonds will have to divest from the companies on the list, though 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 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 written statement on Wednesday.
New York-based BlackRock, which has publicly embraced investing more in renewable energy, criticized Hegar’s decision.
“This is not a fact-based judgment,” a spokesperson for the company said in a written statement. “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,” the spokesperson added. “Politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees, is not consistent with that duty.”
The other nine companies banned completely are: BNP Paribas SA, a French international banking group; Swiss-based Credit Suisse Group AG and UBS Group AG; Danske Bank A/S, a Danish multinational banking and financial services corporation; London-based Jupiter Fund Management PLC, 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.
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 Texas’ economy — oil and gas.
“But at the end of the day, it’s all about a rate of return,” said Ed Hirs, an energy economist at the University of Houston. “Quite honestly, fossil fuel companies, in particular oil and gas companies, have not been great performers in the (stock market) prior to this year.”
The Lone Star Chapter of the environmental group Sierra Club said Hegar’s “climate-denying publicity stunt will be costly for taxpayers.”
“Major financial institutions like the ones on this list are beginning to recognize that investments in fossil fuels bring significant risk in the face of an inevitable clean energy transition, and that addressing the financial risks of the climate crisis is essential to good business,” said Sierra Club Fossil-Free Finance Campaign Manager Ben Cushing. “The fact that the Texas Comptroller has arbitrarily picked a handful of companies that, despite their climate commitments, continue to have massive fossil fuel investments, shows that this is nothing more than a political stunt at Texas taxpayers’ expense.”
We’ve already determined that Comptroller Hegar is math-challenged, so this shouldn’t come as a surprise. We’ve also seen the Lege make similar laws to protect gun manufacturers and the country of Israel, about which more in a minute. I suppose one could make a protectionist case for this kind of legislative cherry-picking, and as someone old enough to remember the efforts to divest from South Africa in order to pressure it to abandon apartheid, there is certainly a moral case for this kind of law, if not for these specific ones. But if you’re going to go that route, you need to be clear about what you’re aiming at.
The firms on Hegar’s list are BlackRock, UBS Group, BNP Paribas, Credit Suisse Group, Danske Bank, Jupiter Fund Management, Nordea Bank, Schroders, Svenska Handelsbanken, Swedbank, and UBS Group.
Of the six firms that responded to the Houston Chronicle’s inquiries by press time, four deny that they are “boycotting” the oil and gas industry, even if they admittedly have some investments that reflect the growing influence of — and consumer and investor interest in — the environmental, social and governance (ESG) movement.
“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,” said a spokesperson for Credit Suisse, based in Zurich. Spokespeople for BlackRock, UBS Group, and Schroders made similar points in disputing the comptroller’s “boycotting” label.
This is a different approach than the one taken by BlackRock, for example, which had $287 billion in assets invested in energy companies globally as of June, $108 billion of which is invested in Texas energy companies, a spokesperson said.
There are “many similarities” between BlackRock’s approach to investing in the fossil fuel industry and that of other major firms, such as JP Morgan, didn’t make the list, said Andrew Poreda, senior vice president and senior ESG Research Analyst at Sage Advisory Services, an investment firm based in Austin.
A “frequently asked questions” document prepared by Hegar’s office, raises questions itself about the state’s methodology, Poreda said. For example, the comptroller’s initial criteria included whether a firm had made public pledges to the Net Zero Banking Alliance or Net Zero Asset Managers Initiative, which call for net-zero greenhouse gas emissions by 2050, nearly three decades from now.
That’s not exactly radical territory. Oil and gas companies are openly talking about plans for the energy transition — including getting to net-zero emissions.
“Envisioning a different world in three decades hardly classifies as a boycott, and at this point is so far away that it is largely aspirational,” Poreda argues.
It doesn’t have to make sense, it just has to make the base think they’re owning the libs. That’s Republican policy in a nutshell these days.
To bring it back to the Israel example for a minute, that law has been mostly blocked by a federal judge, who ruled that an engineering firm that couldn’t get a contract with the city of Houston had its free speech rights violated by the Texas law. I Am Not A Lawyer, but it sure looks to me like the laws banning “boycotts” of fossil fuels and gun manufacturers are at least in the same neighborhood as the anti-Israel boycott law is. Credit Suisse and Blackrock probably don’t need the state of Texas’ business, but other red states are adopting similar laws, and at some point it does start to cost them real money. When that happens, the lawyers usually get involved. I don’t know what happens from there, but I won’t be surprised if that’s where it goes. The Chron has more.