Compliance Trends: Conflicts over ESG investing escalate with Texas blacklisting


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Texas blacklists major players over ESG; BlackRock pushes back

Conflicts related to ESG positions are escalating quickly. The state of Texas has formally blacklisted BNP Paribas, UBS Group, BlackRock, and several other firms due to their moves away from investments in fossil-fuels industries. State pension funds and other public investment dollars may no longer be invested with the listed firms.

The new state law exists to punish firms that Texas believes are prioritizing ESG—Environmental, Social, and Governance—over fossil-fuels investments that are central to states like oil-rich Texas.

Other states have also pushed back against ESG commitments, derisively labled ‘woke’ investing by its detractors. Several are moving to withhold public-funds investments from firms considered too friendly to ESG concerns. Pension funds for state employees are an example of public funds that represent huge opportunities for investment firms.

The very idea of ESG concerns has taken on intensely partisan tones for many policy makers, companies, and investment firms. Conservative-leaning states have tended to push back against ESG, in particular.

BlackRock, which has emphasized ESG options in its investment funds, responded to the blacklisting by asserting that it has invested over $100 billion in energy-related companies in the state of Texas.

Attorneys general from 19 states had sent a letter to BlackRock in early August complaining about the firm’s ESG policies. BlackRock just replied and is asserting that its positions have been misconstrued and misrepresented. In its reply, BlackRock emphasized that taking into account issues like climate change are not about ideological positions. Rather, climate change and its effects pose both risks and opportunities and that it’s the firm’s responsibility to take into account the many risk factors that affect investment performance overall.

The escalating politicization and ‘culture-warification’ of ESG investing in the U.S.—especially with high-profile mid-term and presidential elections looming—can be predicted to continue apace.


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