Texas launches investigation into big banks over potential violations of state oil, gas anti-boycott laws

Amanda Albright and Danielle Moran, Bloomberg October 18, 2023

(Bloomberg) – Texas Attorney General Ken Paxton’s office said it’s reviewing whether 10 financial companies, including Bank of America Corp. and JPMorgan Chase & Co., violate a Republican-backed state law that punishes firms for restricting their work with the oil and gas industry because of climate change concerns.

Texas Attorney General Ken Paxton

The office announced that it was reviewing companies that are members or affiliate members of the Net Zero Banking Alliance, Net Zero Insurance Alliance, Net Zero Asset Owner Alliance, or Net Zero Asset Managers.

“This office is reviewing whether companies or any affiliates that are members of a Net Zero Alliance are companies that boycott energy companies in violation of Senate Bill 13,” Leslie Brock, assistant attorney general, said in the letter.

Paxton said Wednesday that he asked his public finance division to take “proactive measures” to ensure companies comply with the state’s anti-boycott laws.

“The Office of the Attorney General will continue to vigorously enforce our laws that prevent taxpayer funds from going to companies whose ‘ESG’ policies harm Texans or key Texas industries,” Paxton said in an emailed statement Wednesday. “Companies who discriminate against firearms businesses and organizations, the oil and gas industry, or the nation of Israel will not enjoy the opportunity and privilege of winning public contracts in Texas.”

Paxton said in an advisory that issuers should do their own due diligence on the companies they enter into contracts with, and not just rely on written verifications.

“Lists of boycotters and discriminators maintained by the Attorney General and the Comptroller of Public Accounts are not exhaustive lists of companies that are in violation of state law,” the advisory said. “These lists should be a starting point — not the end-all” in determining whether a company is a boycotter or a discriminator under state law.

The Net Zero Banking Alliance, convened under the United Nations, includes a group of banks that have committed to “financing ambitious climate action to transition the real economy to net-zero greenhouse gas emissions by 2050.” More than 130 banks are members of the alliance, according to its website.

Eight coalitions. The alliances covered in the review are among the eight climate finance coalitions within the Glasgow Financial Alliance for Net Zero, which is comprised of coalitions representing all corners of the finance industry including banks, asset managers and asset owners.

GFANZ is co-chaired by Mark Carney, who has been named chairman of Bloomberg Inc.’s board and is a former Bank of England governor, and Michael R. Bloomberg, the founder of Bloomberg News parent Bloomberg LP.

Members or affiliate members of those initiatives include Bank of America, Barclays Plc, JPMorgan, Morgan Stanley, RBC Capital Markets, and Wells Fargo & Co., the attorney general’s office said.

The banks are major underwriters in the $4 trillion state and local debt market. They face the potential of losing out on public finance business in Texas, which is the biggest market for municipal bond sales so far in 2023. Already, UBS Group AG, another major bank, is on a list of companies that the state comptroller determined violated the law. That hurt the company’s public finance business in Texas.

The AG’s office said it would provide guidance and “steps that may be taken to avoid market disruption” if a company is found to be in violation of the legislation.

“We make business decisions based on client needs and the specific circumstances clients present to us,” Bill Halldin, a Bank of America spokesperson, said in an emailed statement.

A JPMorgan representative said the bank doesn’t boycott energy companies. “We make our own business decisions and do not relinquish decision making over these matters to third party organizations,” the bank said in a statement.

Spokespeople for Wells Fargo and Barclays declined to comment. Representatives for the other banks didn’t respond.

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