State financial officer action against ESG investing (2022)
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On August 24, the government of Texas joined West Virginia in issuing a list of companies and funds that are ineligible to do business with the state because of their ESG policies and/or statements. The list – an outgrowth of a law passed last year – hits many of the biggest names in ESG investing, including BlackRock:[1]
"Texas Comptroller Glenn Hegar on Wednesday accused ten financial companies, including investing titan BlackRock, and 350 investment funds of taking steps to 'boycott energy companies.'
"The move could force certain Texas government funds, such as retirement funds for state workers, to sell any shares in these companies. It also places these companies alongside lists of other classes of companies covered under Texas divestment statutes, such as companies with 'links to foreign terrorist organizations' and ties with Iran and Sudan.
"The list, which grows out of an investigation first announced in March, is an effort to publicly highlight companies that are, in Hegar’s view, advancing agendas that threaten the energy industry in Texas, which is the top oil and natural gas producing state in the country. Texas produced 43% of the total crude oil produced in the United States in 2021 and 25% of its natural gas, according to the U.S. Energy Information Administration (EIA). Texas also has 31 petroleum oil refineries representing 32% of the nation’s refining capacity, making it the state with the most refineries and refining capacity of any state in the country.
"Hegar said the focus on environmental, social and corporate governance (ESG) standards in finance had become a proxy for political agenda setting. ...
"In response to the announcement from Hegar on Wednesday, BlackRock said it objected to the ruling.
"'We disagree with the Comptroller’s opinion. This is not a fact-based judgment. BlackRock does not boycott fossil fuels — investing over $100 billion in Texas energy companies on behalf of our clients proves that,' a BlackRock spokesperson told CNBC in a statement."
The next day, BlackRock responded to the move by the Texas government, insisting that the declaration was, in its view anti-competitive:
“BlackRock has come out fighting against Texas’s decision to single it out as hostile to fossil fuels, calling the state’s targeting of it 'opportunistic', 'anti-competitive' and 'bad for business'.
"The world’s biggest asset manager was the only US company included by Glenn Hegar, Texas comptroller, on a list of 10 financial institutions that 'boycott' fossil fuels. The groups face possible divestment by state pension funds.
"'Trying to stop a US company from doing business in its own backyard is bad for business,' said Mark McCombe, the head of BlackRock’s US business, who made multiple trips to Texas to lobby state officials while the list was being drawn up. 'It looks opportunistic in this climate.'
"'We have never turned our back on Texas oil and gas companies,' said McCombe, noting that BlackRock is the single largest investor in the state’s oil and gas industry and has $290bn in Texas-based assets. 'This is anti-competitive.' …
"Hegar denied in an interview that the list was politically motivated. Companies on the initial list of 19 as well as the 150 behind the specific investment funds were invited to explain their position on fossil fuels, he said. He added that some were able to provide information that allayed the state’s concerns.
"Those who did not, and those who failed to respond, were put on the final list of 10, which included Credit Suisse, UBS and BNP Paribas, among others.
"'The process was open and transparent,' Hegar told the Financial Times. 'No matter what you do you run the risk of criticism.' …
"The financial groups on the list have 90 days to convince Texas to change its mind. State pension funds will then have to notify the comptroller of their holdings, but the law gives them some flexibility on selling out if it affects their fiduciary duty to retirees.”
See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
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