Texas still skeptical about companies claiming to withdraw from ESG commitments

The Texas comptroller remains skeptical about financial institutions recently claiming to have withdrawn from Environmental, Social, and Governance (ESG) investing policies, which they have touted as fighting climate change.

J.P. Morgan Asset Management (JPMAM) and State Street Global Advisors recently announced they would withdraw from the Climate Action 100+, “an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitter take necessary action on climate change.”

Climate Action 100+ claims to have more than 700 investors who have $68 trillion in assets. The group created a “net zero standard for oil and gas” targeting 10 companies, several of which are headquartered in Texas.

State Street recently said CA100+’s Phase 2 requirements for participants “are not consistent with our independent approach to proxy voting and portfolio company engagement.”

BlackRock Inc. also recently announced it would scale back its commitment to CA100+ but transferred its membership to a subsidiary, BlackRock International Ltd.

The announcements came after the Texas Comptroller has been adding financial companies to its list of those that boycott the oil and natural gas industry by implementing ESG policies. Fifteen companies and 353 publicly traded investment funds are on the list, including Blackrock, Inc., which has been on the list since August 2022.

Texas Comptroller Glenn Hegar has argued that “Texas has been a leader in calling out investment firms that have been playing politics with the retirement money of hard-working Americans. Our goal has always been to bring some honesty to what has really been a one-sided and intellectually dishonest discussion.”

The institutions on the comptroller’s list are subject to Texas Government Code Chapter 809 divestment provisions, which define a financial company as a publicly traded financial services, banking or investment company. State governmental entities are prohibited from investing in the companies and investment funds on the list.

Hegar said in a statement on Thursday that companies distancing themselves from CA100+ is a “welcome development.” He also said it is “a testament to my efforts to bring greater transparency to an opaque and poorly defined segment of the financial sector, as well as to foster an intellectually honest conversation around ESG investing. This lack of transparency created an environment that put politics above profits and led many financial firms to disregard their fiduciary duty to clients.”

However, he remains skeptical.

He explained the experiences his staff have had when talking to people in the financial industry. “We heard firms telling Texas one thing but then providing very different and often contradictory information to states like New York or California,” he said. “Unfortunately, some of that doublespeak continues in these announcements.”

He pointed to a JPMAM spokesperson touting “the significant investment it has made in its investment stewardship team and engagement capabilities, as well as the development of its own climate risk engagement framework” and to BlackRock “attempting a kind of shell game by shifting its membership to another entity under the BlackRock umbrella.”

“While I applaud the spirit of these announcements,” he said, “I assure the people of Texas that I remain committed to enforcing the laws of our state as passed by the Texas Legislature. The people of Texas and Texas lawmakers were clear when they entrusted me with this important task — Texas tax dollars should not be invested in a manner that undermines our state’s economy or threatens key Texas industries and jobs.”

The comptroller’s staff are continuing to assess all company policies on its current list as well as examining its listing process, he said. While “three of the largest money managers on the planet have now pulled back from the CA100+ coalition,” he said his staff “will continue to make listing decisions based on Texas law.”

Texas remains the oil and natural gas capital of the United States. Last year, the Texas oil and natural gas industry broke records in every category, reporting the highest ever totals in production, exports, refining outcomes, crude oil supply, and paying the largest tax revenue contribution in state history of more than $26.3 billion.

Texas is also leading the United States in emissions reductions, as noted by the Texas Methane & Flaring Coalition, Texans for Natural Gas, and The Environmental Partnership, The Center Square has reported.

According to a recent Texan’s for Natural Gas report, producers in the Permian Basin in west Texas reached a record low of methane intensity in 2022 while simultaneously reaching record production levels. The industry also reduced methane emissions intensity by nearly 85% between 2011 and 2022, according to the analysis.

“No one produces, transports, and refines oil and natural gas with the same commitment to safety and protecting the environment as American producers,” Todd Staples, president of the Texas Oil & Gas Association, argues. “Industry-led initiatives ... are dramatically reducing emissions and achieving environmental gains unseen anywhere else in the world.

“American energy leadership starts in Texas and our nation, our economy and our world are better because of the unparalleled stewardship of Texas oil and natural gas companies.”