Texas banned UBS Group AG, Black Rock Inc., and eight other finance companies from operating in the state after it was found they were hostile to the energy industry.
The Republican state comptroller, Glenn Hegar, named the companies on Wednesday. He said they would be stopped from entering into contracts with local entities and the government organization after it was revealed that they were boycotting the fossil fuel sector. The decision ended six months of suspense during which the banks suffered business as the issuers of Texas municipal-bond avoided those companies whose status was unclear during the probe.
During March and April, the comptroller enquired from more than 150 firms requesting information on whether they were ignoring the oil and gas sector in favor of more sustainable financing and investment goals.
A state law backed by the GOP implemented on September 1, 2021, triggered the survey this year. The law has restricted the Texas government from entering into deals with companies that have curbed relationships with carbon-emitting energy firms. Texas is a top crude oil and natural gas producer in the US.
Financial Clout
Hegar said that the ESG – environmental, social, and corporate governance movement had created a perverse and opaque system. It allows some finance firms to use their financial clout to push agendas, political and social, in secrecy and against the interest of the clients and shareholders.
The companies on the comptroller’s list include Credit Suisse Group AG, BNP Paribas SA, Danske Bank A/S, Nordea Bank ABP, Jupiter Fund Management Plc, Svenska Handelsbanken, Schroders Plc, and Swedbank AB.
According to Hegar, the State pension funds that include the Teacher Retirement System of Texas will have to divest from these companies though the laws also provide exceptions. The comptroller’s office said that the list might be modified, and they will review information from time to time.
The raking up of the issue has roots in the earlier shift by banks and asset managers to prioritize policies that consider the ESG. These companies say that they are simply responding to demands by customers for ESG strategies that will do good for not only the world but also the investors. Oil and gas companies are usually excluded from ESG funds as they are known to contribute to greenhouse gas and pollution that fuels climate change.
In response to Hegar’s survey, dozens of companies have defended their policies saying they do not boycott the energy sector but act according to their customer’s interests.
Hagar, in a statement, said that the financial institutions take an anti-oil and gas position publicly, but behind closed doors, the story is different- a clear case of doublespeak.
