The Lone Star State has taken significant steps to stop major financial institutions from using the taxpayer money invested in them against the Texas energy industry.
Notably, the state has worked to stop the environmental, social, and governance (ESG) investing model, which explicitly prioritizes “green” energy companies and discriminates against oil and gas.
As reported by The Dallas Express, the State Financial Officers Foundation (SFOF) recently held its national meeting in Plano, where state treasurers, auditors, and comptrollers met to discuss how their states have worked to stop the rising trend of ESG investing and disinvested from firms that pursue it.
Among the states represented Texas stood out as one of the first to pass legislation to move taxpayer money away from financial management groups and funds that discriminate against oil and gas, which are vital industries for the state.
Since 2014, Glenn Hegar has served as the Texas Comptroller of Public Accounts, functioning as “the steward of the state’s finances, acting as tax collector, chief accountant, chief revenue estimator, and chief treasurer for all of state government.”
At the SFOF meeting, Hegar sat down with The Dallas Express and explained the steps Texas has taken to prevent taxpayer funds from being deployed against its industries.
In 2021, the legislature decided to boycott firms that “inflict economic harm” on companies that engage in “fossil fuel-based energy.” As comptroller, Hegar compiled a list of “all financial companies that boycott energy companies.” The list was then used as a guide for divesting taxpayer funds.
Looking back at the original implementation of the law, Hegar explained, “When you start something brand new like that, you invent the wheel, you invent the car, you invent the train. No one’s ever done this before. You’ve got to figure out how’s it going to work mechanically. How is it going to operate? So it obviously took a lot of work to get to the point of providing a list.”
“But what was so critical for me is it’s imperative that whoever is putting out a list needs to be very transparent and open,” Hegar continued, stressing the importance of being open with companies about why Texas taxpayer money was going to be divested from them.
“You may disagree whether you should be on the list, but at least I should be able to explain to you this was our process,” he said. “It’s imperative that you do that because I think things shouldn’t be done in a vacuum or in a black hole.”
Hegar said he cared more about getting financial institutions to end their campaigns against oil and gas than waging war against the institutions themselves.
“My prerogative is about changing behavior — about connectivity, open, honest dialogue,” he explained. “It’s about managing a political objective that continues to evolve … that’s why transparency is imperative.”
When asked about some of the difficulties encountered when compiling the list, Hegar noted, “The big lie is … that a lot of these entities, they either, out of one side or the other, put all this rhetoric out that they’re boycotting the oil and gas industry, yet if you look behind the scenes they’re still investing in it. They’re just not telling the left they’re investing. It’s like they’re hiding it. Why not just be honest with what you’re doing?”
On the other hand, there have been companies who claimed they have not divested from oil and gas but still restrict capital to projects that would benefit Texas energy companies, such as oil exploration and discovery, Hegar explained.
“You know, it’s complicated,” Hegar said, adding that it is important to “shine a light on it … [and] peel the layers back.”
The approach that Texas and other states have taken against potentially damaging ESG investing may have resulted in S&P Global Ratings ending its policy of ESG scoring, as reported by The Dallas Express.
“While I complimented S&P for removing it … they did say they’re going to continue to have it injected in their credit rating,” Hegar said. “So, you know, I’m not going to say, ‘Oh, this is a victory, yay.’ No, you have to read what they said. It’s still a component.”
Supporters of ESG investing claim that concerns over climate change warrant such coordinated financial action.
The Organisation for Economic Co-operation and Development (OECD) has claimed, “The growth of sustainable finance, including the increasing array of financial products, has attracted the attention of investors, policy makers, and various stakeholders in civil society as to its potential to deliver financial returns, align with societal values, and contribute to sustainability and climate-related objectives.”
For its part, OECD offers “guidance for policy makers and market participants seeking to strengthen ESG investing and finance a climate transition,” according to its website.