Texas continues to play hardball with financial companies that it considers to be opposed to the oil and gas industry, reminding state pension funds this week that they are barred from conducting business with such firms.
Comptroller Glenn Hegar on Wednesday sent letters to the heads of five government employee pension funds and the Permanent School Fund reminding them of the terms of a 2021 state law, Senate Bill 13, that prohibits Texas state agencies that invest funds from putting money in financial companies that “boycott” energy companies.
His office had prepared a list of “identified boycotters” after the law was enacted, the letters note, and state agencies are expected to cut ties with them.
Among the investment firms on the state’s banned list, New York-based BlackRock appears to be the most scrutinized. The company has some $10 trillion under management.
Others who have been criticized by Hegar for their alleged opposition to the fossil-fuel industry include financial giants UBS Group, BNP Paribas, Credit Suisse Group, Danske Bank, Jupiter Fund Management, Nordea Bank, Schroders, Svenska Handelsbanken and Swedbank.
Related: Blackrock, UBS and others on state’s naughty list after “boycotting” oil and gas companies
“The boycotters…should not be permitted to benefit from assets invested for the future of Texans while simultaneously undermining our state’s economic future,” Hegar writes in the new letters.
The letters, obtained by the Houston Chronicle, are substantially similar to each other, though they specify actions by each fund that are considered questionable, by the comptroller’s office, under the 2021 law.
Five of the funds — the Teachers Retirement System, the Employees Retirement System, the Texas Emergency Services Retirement System, the Texas Municipal Retirement System and the Permanent School Fund — were found to have some sort of dealings with BlackRock. Hegar’s letter to the Texas County and District Retirement System notes that the fund’s 2021 annual financial report included broker commissions to Credit Suisse and UBS, both headquartered in Zürich.
BlackRock declined to comment, but has previously denied that it is boycotting the fossil fuel industry, noting that the firm has some $108 billion invested in Texas oil and gas companies.
In an interview Thursday, Hegar said, “It’s not necessarily what you’ve done in the past, it’s what you’re doing today and planning to do in the future.”
Many investors in what has become known as the environmental, social and corporate governance (ESG) movement consider climate change and how companies are addressing it. The movement has grown to include the Securities and Exchange Commission, which is proposing standards for how companies report greenhouse emissions and their approaches to managing climate change.
Related: Further state-level boycotts of financial firms could come at a steep price
On its website, BlackRock says: “Our investment conviction is that climate risk is investment risk, and that integrating climate and sustainability considerations into investment processes can help investors build more resilient portfolios and achieve better long-term, risk-adjusted returns.”
The pressures on other investors to follow suit will only grow with global warming concerns and have made it harder for oil companies to secure financing for new projects.
A number of states with Republican-led legislatures, including Arizona, Florida, West Virginia and Oklahoma, have taken up legislation that is similar to the 2021 Texas law, targeting financial firms that are seen as “discriminating” against fossil fuels, guns, and other industries.
Conversely, some Democrat-led states want investment firms to do more. New York City Comptroller Brad Lander, for example, in September 2022 sent a letter to BlackRock CEO Larry Fink invoking the firm’s “stated commitment to net zero emissions.”
“We recognize the absurdity of Texas Comptroller Hegar’s recent directive to boycott BlackRock, which caters to short-sighted oil and
gas interests, irresponsibly jeopardizes the returns of Texas pension funds, and potentially raises costs for Texas taxpayers,” Lander wrote. “But political theater cannot and must not guide fiduciary actions.”
Hegar denied that political theater was behind the letters sent this week.
“It’s a law, which I am to enforce,” he said, adding: “My intent here is to have an intellectually honest conversation.”
erica.greider@houstonchronicle.com
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