As the world’s largest financial institutions rally around shared climate goals, the difference between official rhetoric and real life is becoming clear.
Posted at 7:00 am
We’re seeing this happening in Texas right now, which just banned BlackRock, the world’s largest institutional investor, from its country for a commitment to reducing the weight of fossil fuels in its portfolio.
BlackRock and nine other financial institutions, including Credit Suisse and UBS, are now blacklisted from doing business with the state of Texas.
The State Comptroller required financial institutions and investment funds suspected of oil boycotts to show evidence that this was not the case if they wished to continue doing business on its territory.
Texas views ESG (environmental, social and governance) criteria and the stated desire of several large investors to remove fossil fuels from their portfolios as an oil boycott and an affront to its economy.
“The ESG movement has led to an opaque and perverse system in which financial firms no longer make decisions in the interest of their shareholders, but use their power to advance a social and political agenda,” said state comptroller Glenn Hegar, who called “awakened”.
The Texas Blacklist
Companies that no longer have access to public markets:
- BLACK ROCK (USA)
- BNP PARIBAS (France)
- CREDIT SUISSE (Switzerland)
- DANSKE BANK (Denmark)
- JUPITER FUND MANAGEMENT (UK)
- NORDEA BANK (Finland)
- SCHRODERS (UK)
- SVENSKA HANDELSBANKEN (Sweden)
- SWEDBANK (Sweden)
- UBS (Switzerland)
Source: Texas Comptroller of Public Accounts
The institutions targeted by Texas are signatories to the Glasgow Financial Alliance for Net Zero, under the aegis of the UN and chaired by Mark Carney, former governor of the Bank of Canada and the Bank of England. Some 160 companies, managing $70 trillion in total assets, have committed to phasing out their support for the fossil fuel sector in order to reach net-zero for their portfolio by 2050.
Texas, which produces 43% of all American oil and 25% of natural gas, has decided to respond to what it sees as an attack on its economy. It passed legislation to ban oil-boycotting financial institutions from participating in its bond market and managing its employees’ pension funds.
Texas is considering boycotting any measure aimed at restricting a bank’s relationship with an oil or gas company because the latter does not meet minimum environmental requirements.
In response to questions from the state auditor, most affected financial institutions worked hard to pass the test and continue doing business in Texas.
“Supposed Commitments Terminated”
Such is the case of the Royal Bank, whose climate commitments have been deemed sufficiently insignificant to please the state.
Canada’s largest bank, which has pledged to make its loan portfolio carbon neutral by 2050, has reassured Texas that it is not opposed to oil at all. Quite the opposite, as she replied to the State Comptroller, insisting she had $25 billion worth of loans in the oil and gas sector. It is possible, the royal argued, to fund fossil fuel companies while fighting climate change.
However, the good promises made by the financial institutions are only slowly followed by concrete action. Greenpeace criticizes this in a report published last week on the Royal Bank and other Canadian banks.1.
The report denounces the “alleged commitments” made by Canadian banks and argues that they should be expelled from the international net-zero alliance by the United Nations if they do not do more to advance the fight against climate change.
In its official response, BlackRock deplored the state of Texas’ politicizing the debate and imposing restrictions on access to its market, which he argued went against the interests of the public.
BlackRock Big Boss Larry Fink has campaigned from all sides to fight climate change. The financial giant remains ExxonMobil’s second-largest shareholder with a 6% stake and manages $20 billion in Texas public funds.
In addition to Texas, the state of West Virginia, a major coal producer, has banned two American banks, Wells Fargo and JP Morgan Chase, from their public markets because of their climate commitments.
Texas’ blacklist includes 10 companies, most of them European, and 354 mutual funds. This war has only just begun. Taxpayers in affected countries will suffer from the reduction in competition that will result from certain players being squeezed out of the market. On the other hand, banks will find it increasingly difficult to speak from both sides of the mouth at the same time.