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Texas banned BlackRock Inc., UBS Group AG and eight other financial firms from doing business with the state after it found BlackRock Industries hostile.
Republican state Comptroller Glenn Hagar on Wednesday named firms barred from most contracts with state and local entities after his office said they were “opposed” to the fossil fuel sector. The move ends six months of uncertainty that cost banks business as Texas municipal bond issuers steered clear of firms whose status was unclear during the investigation.
The regulator sent questions to more than 150 companies in March and April, asking for information on sustainable investment and financing goals that are moving away from the oil and gas industry.
The survey was prompted by a GOP-backed state law that takes effect on Sept. 1, 2021, that would bar Texas governments from entering into certain contracts with companies that cut ties with carbon-emitting energy companies. Texas is the nation’s top producer of crude oil and natural gas.
“The environmental, social and corporate governance movement has created an opaque and perverse system in which some financial companies do not make decisions in the best interest of their shareholders or customers, but instead use their financial resources to push social and political agendas. In secret,” Hegar said in a statement.
Other companies on the controller’s list include BNP Paribas SA, Credit Suisse Group AG, Danske Bank A/S, Jupiter Fund Management Plc, Nordea Bank ABP, Schroders Plc, Svenska Handelsbanken and Swedbank AB.
State pension funds, including the Teacher Retirement System of Texas, are required to divest from the companies, although the law includes exceptions, Hegar said. The list is subject to change and the Office of the Comptroller said it will continually review information.
The dust-up stems from some asset managers and banks prioritizing policies that take into account environmental, social and governance issues. Companies are simply responding to customer demand by developing so-called ESG strategies designed to do good for the world and enrich investors, he said. Oil and gas companies are excluded from ESG funds because of their contribution to pollution and greenhouse gases that fuel climate change.
Dozens of companies have defended their policies in responses to Hegar’s research, saying they are not taking on the energy industry, but are supposed to protect the interests of their customers.
Hegar said in a statement that financial institutions are “doubly guilty” of publicly engaging in anti-oil and gas rhetoric while presenting a very different story behind closed doors.
Amanda Albright and Shelly Hagan, Bloomberg
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