Texas is responding to what it calls a boycott of fossil fuel investments with a boycott of its own. It’s turning out to be financially expensive and probably politically expensive, too.
Texas’ process is a fig leaf, financial experts say, for a political stunt that already has cost Texans millions of dollars.For Republican officials, though, the Texas model serves a dual purpose. Using ESG research to blacklist companies could chill the circulation of corporate sustainability data. And a paper trail could make it easier for GOP officials to justify their actions to the public — including some conservatives who wanted the state to sanction even more companies.
Texas Comptroller Glenn Hegar (R) said he aimed to create a data-driven system for the “boycott” list that would resemble due process.
“One of the things that I wanted to make sure, no matter what, is that we created a process where we could tell people, ‘This is what we did; this is how you got on, or how you got off,’” Hegar said in an interview….
Assessment of Texas’ vetting process from financial experts and sustainability advocates has been unforgiving.
“Completely bonkers” is how Alison Taylor, a professor at New York University’s Stern Business School, described Hegar’s approach.
“It’s kind of juvenile,” said Mary Cerulli, a finance veteran who is now director of Climate Finance Action. “This guy has lost his critical thinking.”
Hegar and the other Republican officials behind this effort don’t understand the nature of ESG investing, they and other experts said. Many of these financial firms remain major investors in fossil fuel companies. And the fossil fuel companies themselves are leaning into ESG reporting rather than resisting it.
That’s because ESG management is risk management, experts said. The term gets abused in Wall Street marketing to retail investors, they say, but for the institutional investors on Hegar’s list it often takes the form of sophisticated modeling and analysis.
So it makes no sense, they said, for Texas to distinguish between investment decisions made for ESG reasons and decisions made for business reasons; they’re the same thing.
But observers say Texas has done the opposite. The state’s law allows the comptroller to decide whether a financial services company is “boycotting energy” — or if it is merely avoiding energy companies for an “ordinary business purpose.”
The result, they say, is a mess of subjective standards, like whose ESG data to count (different research firms can produce different results) or whether coal divestment counts as “boycotting energy” (Hegar said it doesn’t, but some Republicans think otherwise).Inside Texas’ attempt to turn ESG upside down – E&E News