Major Banks & AMs on Texan ESG Blacklist

    Stockholm (NordSIP) – Earlier this year NordSIP covered the apparent disconnection between BlackRock’s corporate level net-zero commitment and reported communication with clients and other stakeholders behind the scenes.  The firm seemed to be attempting a delicate balancing act with a view to retaining clients while edging towards compliance with the goals of global climate agreements.  Meanwhile, BlackRock has found itself on an ESG blacklist published by the State of Texas’ comptroller of Public Accounts.

    The List of Financial Companies that Boycott Energy Companies includes BlackRock, BNP Paribas, Credit Suisse, Danske Bank, Jupiter, Nordea, Schroders, Handelsbanken, Swedbank and UBS.  This is complemented by a further list of 348 specific investment funds from these and many other providers. The State Comptroller’s order is for the divestment of existing holdings and the prohibition of any new investments in the listed firms by any Texan State governmental entities.  These include the Employees Retirement System of Texas, Teacher Retirement System of Texas, Texas Municipal Retirement System, Texas County and District Retirement System, Texas Emergency Services Retirement System and the Permanent School Fund.  Once they receive the updated list, each entity will now be required to report any relevant holdings within 30 days and confirm divestment by the following January 5th.

    The common theme for exclusion appears to be any consideration within investment processes of climate change related targets, which is interpreted by State Comptroller Glenn Hegar as a “boycott of energy companies.”  Hegar takes a dim view of the entire ESG movement, which he claims, “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.”  In compiling the blacklist, the State Comptroller’s office seems to have made no distinction between fossil fuel divestment and engagement-based strategies focusing on the transition to a lower carbon economy.  There is also no consideration whatsoever of climate-related risks affecting portfolio companies or potential financial losses relating to stranded assets.  Finally, the order effectively throws the Social and Governance “baby” out with the environmental “bathwater.”

    Several of the firms on the blacklist have signalled their intention to appeal the decision, with some pointing to ongoing multi-billion-dollar investments in the traditional energy sector.  Texas is just one of several US states embarking on an ideologically fuelled campaign against ESG funds.  On August 23, 2022, Florida Governor Ron DeSantis stated that “ESG is dead on arrival in Florida” as he passed a resolution prohibiting the incorporation of ESG considerations in the investment processes covering the state’s USD 228 billion pension funds.  With his use of language such as “ESG mania” and claims of “corporate dominance” over Floridians, DeSantis is at the forefront of the politicisation of climate change mitigation efforts, which threatens to put a spanner in the works of what should be concerted efforts to reduce global greenhouse gas emissions.  Sadly, while it would be to detriment of millions of public pensioners, poor long-term investment performance could ultimately lead to a reversal of these drastic, simplistic political interventions in the investment industry.

    Image courtesy of Janet Reddick from Pixabay (edited)
    Richard Tyszkiewicz
    Richard Tyszkiewicz
    Richard has over 30 years’ experience in the international investment industry. He has worked closely with major Nordic investors on consultancy projects, focusing on the evaluation of external asset managers. While doing so, Richard built up a strong practical understanding of the challenges faced by institutional investors seeking to integrate ESG into their portfolios. Richard has an MA degree in Management and Spanish from St Andrews University, and sustainability qualifications from Cambridge University, PRI and the CFA Institute.

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