BlackRock, UBS Among Firms Facing Texas Ban Over Energy Policies

The firms say they’re simply responding to customer demand for strategies intended to do good for the world while also enriching investors. Because of their contributions to pollution and greenhouse gases that help fuel climate change, oil and gas companies are often excluded from ESG funds.

Dozens of firms defended their policies in responses to Hegar’s survey, saying they don’t boycott the energy industry but are required to act in their customers’ interests.

Hegar said in a statement that financial institutions are guilty of “doublespeak” as they “engage in anti-oil and gas rhetoric publicly yet present a much different story behind closed doors.”

BlackRock told Hegar in a May letter that it’s committed to helping clients invest in the energy industry. The firm said it oversees about $310 billion of investments in energy firms worldwide, including in Texas companies.

The money manager landed on the list after being targeted by conservative lawmakers from a bevy of states. In August, 19 state attorneys general, including Texas’s, wrote a letter accusing BlackRock Chief Executive Officer Larry Fink of pursuing sustainable investments instead of shareholders’ profits.

It’s unclear how the list will impact firms currently doing business with Texas. For one thing, there’s an exception written into the new law that says pensions aren’t required to divest from the banned companies if doing so would hurt their performance.

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The law, Senate Bill 13, bars governments from entering into contracts of $100,000 or more with companies unless the firms verify that they don’t boycott the energy industry. There are exemptions for that portion of the law, too.

Municipalities can sidestep it if they determine that compliance would violate the government’s constitutional or statutory duties related to the sale of debt or management of funds.

Some Texas muni issuers have already been skittish toward companies caught up in the comptroller’s probe. The state’s public-finance market, one of the nation’s biggest, has also been roiled by a separate GOP-backed law targeting Wall Street for taking on policies around firearms.

Bank of America Corp., Goldman Sachs Group Inc., and JPMorgan Chase & Co. haven’t underwritten a municipal-bond deal by the state or its municipalities since the gun law took effect in September.

Texas isn’t alone in attempting to punish Wall Street for pursuing ESG-focused initiatives.

States including Oklahoma, West Virginia and Kentucky have passed legislation this year targeting companies that engage in “boycotts” of the oil and gas industry. In July, West Virginia said it wouldn’t award state banking contracts to five firms: JPMorgan, Wells Fargo, Goldman Sachs, BlackRock and Morgan Stanley.

(Photo: Jeenah Moon/Bloomberg)