Aug 25, 2022 - News

Texas threatens divestments from alleged energy-boycotting banks

Illustration of cracking oil barrel with fists and megaphone.
Illustration: Eniola Odetunde/Axios

The state's chief financial officer has unveiled a first-ever list of 10 financial firms — many of them heavy hitters — that he says "boycott energy companies."

Why it matters: Determined to protect the oil and gas industry, state lawmakers last year demanded that firms that boycott energy companies be cut off from doing business with Texas.

  • BlackRock, BNP Paribas, Credit Suisse and UBS are among the companies that made the list.
  • Public pledges to meet environmental standards beyond federal and state requirements were among the criteria weighed by comptroller staff in building the list.

What they're saying: State comptroller Glenn Hegar accused financial institutions of "doublespeak … as they engage in anti-oil and gas rhetoric publicly yet present a much different story behind closed doors."

  • "This list represents our initial effort to shine a light on entities that are engaging in these practices and create some clarity for Texans whose tax dollars may be working to directly undermine our state's economic health," Hegar said in a statement.

Details: State governmental entities that may be forced to divest from the financial firms include pension funds for state employees, teachers and emergency service workers.

  • The Texas Teacher Retirement System (TRS) alone — the largest public retirement system in Texas — has assets totaling about $200 billion.
  • The TRS will "divest any applicable listed securities while exercising our fiduciary responsibilities to the fund," pension fund spokesperson Kaylee Nemec tells Axios.

The other side: "BlackRock does not boycott fossil fuels—investing over $100 billion in Texas energy companies on behalf of our clients proves that," company spokesperson Brian Beades told Axios.

  • "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."
  • Of note: BlackRock's CEO has used his firm's influence to press other companies to reduce greenhouse gas emissions.
  • "We firmly disagree with the comptroller's decision to include UBS in this list," UBS spokesperson Erica Chase tells Axios. "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."

Between the lines: The politics around investments may be costing Texans.

  • Texas cities may have had to pay an additional half-billion dollars in interest on $32 billion in bonds, eight months into a new law that barred municipalities from contracting with banks that have adopted certain environmental, social and corporate governance policies, per a study published in June by a Wharton professor and Federal Reserve economist.

Dive deeper: This summer, Axios revealed how standard provisions buried deep in Texas contracts help state officials exert political leverage on companies hungry to win — and keep — business with government entities.

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