By Nathan Worcester
Texas on Aug. 24 released a list of ten financial companies and almost 350 funds said to be boycotting energy firms involved in fossil fuels, marking another advance in the war between individual U.S. states and the environmental, social, and governance (ESG) movement.
The state comptroller must publish such a list thanks to Texas Senate Bill 13, which came into effect in September 2021. Passed in June of that year, it requires many state government entities to divest from ESG-led companies and funds.
“I’m happy to see that states are continuing to do what they feel is in their best interest, in terms of fighting back against ESG,” said Derek Kreifels, CEO of the State Financial Officers Foundation, in an Aug. 24 interview with The Epoch Times.
In an Aug. 24 press release, Texas State Comptroller Glenn Hegar explained the reasoning for the bans: “The [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.
“Our review focused on the boycott of energy companies, rather than a review of the entire ESG movement. This research uncovered a systemic lack of transparency that should concern every American regardless of political persuasion, especially the use of doublespeak by some financial institutions as they engage in anti-oil and gas rhetoric publicly yet present a much different story behind closed doors.”
The ten listed companies, viewable here, are BlackRock, BNP Paribas, Credit Suisse Group, Danske Bank, Jupiter Fund Management, Nordea Bank, Schroders, Svenska Handelsbanken, Swedbank, and UBS Group.
“This is not a fact-based judgment,” a spokesperson for BlackRock told The Epoch Times in a media statement on Aug. 24 in response to the Texas decision, adding that BlackRock has more than $100 billion in its clients’ funds invested in Texas energy companies.
The 350 listed funds include offerings from Parnassus, a pioneer in ESG, as well as funds associated with UBS, Vanguard, T. Rowe Price, Fidelity, and the Knights of Columbus, among many other high-profile players.
Public Pledges One Criterion
Public pledges to the Net Zero Banking Alliance, Climate Action 100, or the Net Zero Asset Managers Initiative were one of multiple criteria the comptroller used to screen boycotters.
However, the comptroller did not automatically add companies if they made such pledges. A “Frequently Asked Questions” document on the list states that companies’ actual commitments to such pledges varied significantly.
Multiple state agencies, including the Employee Retirement System of Texas, the Teacher Retirement System of Texas, and Texas Municipal Retirement System, must divest from the listed funds and companies.
There are, however, carve-outs. One exemption allows entities to avoid divestment that would conflict with a state government entity’s fiduciary duty or legal responsibilities. Another exemption applies to funds held indirectly.
Some media coverage of Texas’s law, such as an April article from NPR, has suggested the law’s loopholes could undermine its effectiveness.
Responding to that line of argument, Kreifels suggested that Texas’s law, like others in states across the country, is only the start when it comes to state-level action against ESG.
“I would anticipate that there would be some areas where they realize that down the road, they need to make some tweaks to the new law,” he said, later adding that “ESG has many tentacles in many different industries.”
“It’s impacting not only the financial management space; it’s impacting the insurance industry, it’s impacting agriculture and food costs and production costs. I think that we’re going to be in this battle for several years.”
Others have challenged the economic soundness of Texas’s approach.
Wharton researchers found that Texas’s anti-ESG regime has been costly to taxpayers, as it has necessitated that some municipalities negotiate new deals in a market where competition among banks has been reduced.
The Epoch Times has reached out to the Texas comptroller’s office for comment on these criticisms.
“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,” the spokeperson for BlackRock told The Epoch Times.
“Texans deserve access to the full range of asset managers, and investment opportunities, that can help them meet their retirement goals.”
One Battle in a Larger War
Hegar’s list comes just weeks after a Texas state senate committee demanded documents from BlackRock and other financial companies regarding their ESG practices.
On Aug. 23, Florida Gov. Ron DeSantis requested that his state’s fund managers purge their investments of ESG.
“He’s doing what’s right for the people of Florida,” Kreifels said.
In addition, on Aug. 16, attorneys general from 21 states sent a letter to the Securities and Exchange Commission (SEC) opposing a proposed rule on ESG disclosure. They called it “deeply problematic,” noting its resemblance to the SEC’s other recent rule mandating carbon disclosures.
“The left’s game is that if they can’t get what they want past Congress or the courts, they’re going to change the rules,” Kreifels said in regard to the SEC’s moves in the last several months.
“I’m proud to see a second state in our coalition follow our lead and take definitive action to strike back against the ESG radicals who are trying to destroy America’s ability to return to energy independence,” said West Virginia Treasurer Riley Moore in an Aug. 24 message to The Epoch Times.
Moore’s coalition is West Virginia and the 14 other states that cosigned his November 2021 letter to the banking industry, challenging what he then characterized as an “ongoing and growing economic boycott of traditional energy production industries by U.S. financial institutions.”
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Those fourteen states are Alabama, Arizona, Arkansas, Idaho, Kentucky, Louisiana, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Texas, Utah, and Wyoming.
“As I told people before, West Virginia would be the tip of the spear and there would be an army following behind us—Texas has now joined our ranks. Today is a great day, and I expect more states to soon follow our lead to fight back against the anti-American ESG extremists,” Moore told The Epoch Times.