Texas is threatening to cut ties with some of the world’s biggest financial firms over their efforts to address the climate crisis. On Wednesday, Texas Comptroller Glenn Hegar sent letters to 19 investment firms, including financial giants BlackRock and JPMorgan Chase, accusing them of violating a new state law that prohibits Texas from doing business with any companies that are divesting from the fossil fuel industry for environmental reasons.
It’s the latest move from Texas leaders to stifle a climate movement that they believe threatens the state’s bottom line. It also highlights the state’s propensity to lean into America’s culture war, which continues to paralyze Congress in its ability to pass any kind of meaningful climate policy, even as public pressure to advance climate action grows and the nation experiences some of the worst extreme weather events ever recorded.
With the culture war raging over hot button topics like transgender rights, abortion access and accusations of voter suppression, Texas has regularly remained in the spotlight by pushing forward controversial laws and policies in recent years. That includes legislation regarding climate change and renewable energy.
While a growing number of local and state governments have pledged to divest from fossil fuels in response to increasing public demand to address global warming, Texas has done the opposite. Last year, state lawmakers passed Senate Bill 13, which prohibits Texas from contracting with or investing in companies that divest from oil, natural gas and coal companies. The law defines divestment as refusing to do business with a fossil fuel company because that company does not commit to environmental standards higher than expected by federal and state law, the Texas Tribune reports.
In Wednesday’s letter, Hegar accused the firms of “boycotting” fossil fuels and demanded information over their “investment policies and procedures” to see if they were in violation of the state law.
“We know some of these companies hold investments in oil and gas today, but what about the future? Are they selling the hope of a ‘green’ tomorrow with promises to divest or reduce their fossil fuel exposure?” Hegar wrote.
Any company that was found to be in violation, or is presumed to be in violation due to not responding in a timely manner, risks having its existing contracts with the Texas government canceled and could be cut out of Texas pension funds, Hegar added.
Specifically, the letter singled out the financial firms’ so-called ESG funds as potential violations of the Texas law. ESG funds are investment funds that attempt to do “social good” by taking environmental, societal and corporate governance factors into account. And they have seen record-breaking growth in recent years as investors look for ways to put their money into climate-friendly endeavors.
In 2020, ESG funds were the fastest growing segments of the global market, despite the pandemic grinding the world economy to a near standstill. In fact, the ESG market is poised to reach $41 trillion by the end of the year, with ESG-related assets accounting for one in three dollars managed globally.
While there is a growing body of evidence that ESG funds don’t benefit the environment nearly as much as their supporters claim they do, their popularity poses a threat to states like Texas, which still have a sizable portion of their economies tied to excavating fossil fuels.
Texas is the top crude oil and natural gas producing state in the country, accounting for 43 percent of the nation’s crude oil production and 26 percent of its marketed natural gas production in 2020, according to the U.S. Energy Information Administration. And in 2019, the oil and gas industry generated $411.6 billion for the Texas economy, according to an analysis released last year by the Texas Oil and Gas Association and the American Petroleum Institute.
Still, a growing number of economists say taking climate change into account is the fiscally responsible thing to do and that Texas has already begun to transition away from fossil fuels whether its leaders like it or not. A 2021 analysis from the Institute for Energy Economics and Financial Analysis, a clean energy advocacy group, found that the oil and gas industries are now responsible for 10 percent of the Texas gross domestic product, down from 21 percent in 1981. That drop is partly due to rising competition from renewable energy.
“Tax revenue, employment and overall contribution to the state’s economy from the oil and gas industry has been in a slow decline for decades,” said Trey Cowan, the report’s lead author. “Texas policymakers must recognize the potential risks of continuing to buoy an industry that faces unprecedented competition.”
That’s it this week for Today’s Climate. Thanks for reading and I’ll be back in your inbox on Tuesday.
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