Texas bans financial companies from doing business with state agencies

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Texas banned 10 financial companies from doing business with the state after Comptroller Glenn Hegar stated Wednesday that they didn’t help the oil and fuel business.

Hegar, a Republican operating for reelection in November, banned BlackRock Inc., and different banks and funding companies — in addition to some funding funds inside giant banks equivalent to Goldman Sachs and JP Morgan — from coming into into most contracts with state and native entities after Hegar’s workplace stated the companies “boycott” the fossil gas sector.

Hegar despatched inquiries to a whole bunch of financial companies earlier this yr requesting information about whether or not they had been avoiding investments within the oil and fuel business in favor of renewable vitality companies. The survey was a results of a brand new Texas legislation that went into impact in September and prohibits most state agencies, in addition to native governments, from contracting with companies which have lower ties with carbon-emitting vitality companies.

State pension funds and native governments issuing municipal bonds must divest from the companies on the record, although there are some exemptions, Hegar stated.

“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 stated in a written assertion on Wednesday.

New York-based BlackRock, which has publicly embraced investing extra in renewable vitality, criticized Hegar’s resolution.

“This is not a fact-based judgment,” a spokesperson for the corporate stated in a written assertion. “BlackRock doesn’t boycott fossil fuels — investing over $100 billion in Texas vitality companies on behalf of our shoppers 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 different 9 companies banned fully are: BNP Paribas SA, a French worldwide banking group; Swiss-based Credit Suisse Group AG and UBS Group AG; Danske Bank A/S, a Danish multinational banking and financial companies company; London-based Jupiter Fund Management PLC, a fund administration group; Nordea Bank ABP, a European financial companies group primarily based in Finland; Schroders PLC, a British multinational asset administration firm; and Swedish banks Svenska Handelsbanken AB and Swedbank AB.

The funds inside bigger companies are geared toward sustainable investing, equivalent to Goldman Sachs’ “Paris-aligned Climate US Large Cap Equity ETF” and JP Morgan’s “U.S. Sustainable Leaders Fund.”

Texas vitality specialists stated the intent of the legislation, and Wednesday’s announcement, was to punish financial companies that don’t need to put money into the spine of Texas’ financial system — oil and fuel.

“But at the end of the day, it’s all about a rate of return,” stated Ed Hirs, an vitality economist on 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 stated 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,” stated 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.”

James Coleman, an vitality legislation professor at Southern Methodist University, stated there may be political stress driving either side of this debate.

“Not just from those hoping to reign in fossil fuels, but also from those worried that moving away from fossil fuels is an economic harm,” Coleman stated.

But Coleman stated that “whenever the state limits the potential world that it can do business with, that potentially leaves some returns on the table.”

The precise affect on Texas taxpayers is tough to foretell, stated Felix Mormann, a Texas A&M University School of Law professor who research vitality and local weather change. He referred to as Wednesday’s transfer “a symbolic act by the Comptroller to protest the rise of ESG investing.”

“Will this announcement give a boost to Texas oil and gas companies? Morally, perhaps,” Mormann wrote in an e mail to The Texas Tribune. “But, financially, Chevron, ExxonMobil, and other Texas oil-and-gas majors play in the global league… In other words, I strongly doubt that the Comptroller is setting off the next oil-and-gas boom in Texas.”

As political campaigning heats up forward of the November elections, Hegar this week additionally accused Harris County of slashing its spending on its constables’ workplaces, despite the fact that these workplaces would get massive boosts to their budgets beneath a proposed price range. Republicans used Hegar’s accusation as a possibility to criticize County Judge Lina Hidalgo, the county’s Democratic chief government who’s seen as a rising star within the occasion, as she faces a reelection battle in November.

Last week, Hegar introduced he supports Texas repealing state taxes on menstrual merchandise equivalent to tampons and sanitary pads, a place echoed by Gov. Greg Abbott.

Disclosure: Exxon Mobil Corporation, Southern Methodist University, Texas A&M University, Texas A&M University School of Law and the University of Houston have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news group that’s funded partially by donations from members, foundations and company sponsors. Financial supporters play no function within the Tribune’s journalism. Find an entire list of them here.

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