Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
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Glenn Hegar
Texas Comptroller of Public Accounts
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A Review of the Texas Economy

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Fighting a Fossil Fuels Boycott Texas Divests from Finance Companies with ESG Policies

By Spencer Grubbs Published May 2023

March 2024 Update Financial companies’ withdrawal from climate change group highlighted by Comptroller

Texas Comptroller Glenn Hegar, who has worked to shine a light on environmental, social and governance (ESG) investing, welcomed decisions by top financial companies to withdraw from Climate Action 100+, an investor-led climate change initiative.

J.P. Morgan Asset Management and State Street Global Advisors announced Feb. 15 they would withdraw from the group, while BlackRock Inc. said it will scale back its commitment and transfer its membership to a subsidiary.

“These are welcome developments and a testament to my efforts to bring greater transparency to an opaque and poorly defined segment of the financial sector, as well as to foster an intellectually honest conversation around ESG investing,” Hegar said.

Fiscal Notes explored the basics of ESG investing and, in the story below, examined the responsibilities of the Texas Comptroller of Public Accounts under a Texas law requiring state public investment entities to divest from financial companies that, through such investing, are effectively boycotting the oil and gas industry. 

The Texas Comptroller of Public Accounts has determined 11 financial companies, as of this writing, are boycotting the oil and gas industry pursuant to legislation commonly referred to as Senate Bill (SB) 13. Texas public investment entities subject to the bill must avoid contracting with, and divest from, these companies unless they can demonstrate this would conflict with their fiduciary duties.

Texas Comptroller Glenn Hegar explains that events including the war in Ukraine remind Texans they are best served when energy is the most affordable and reliable, and energy is made more affordable and reliable by a diverse portfolio of energy sources that includes dispatchable oil and gas. This energy diversification is important to Texas’ economy.

“Texas has long been our country’s energy leader,” says Hegar. “Our state has always been the top oil and gas producer, and in recent years, it has become the leading renewable energy producer, too.”

SB 13 stemmed from state officials’ concern that prominent financial institutions and investment funds are moving to effectively ostracize Texas’ oil and gas industry in favor of alternative energy — potentially putting the state’s energy diversity at risk and ultimately doing more harm than good for the state’s fiscal well-being and the best interests of Texans.


The environmental, social and governance (ESG) movement refers to the practice by investment firms and fund managers of screening investments based on preferred ethical, moral or corporate policy standards and as a way to encourage “sustainable” investment portfolios. The ESG movement precludes investments in the fossil fuels industry for designated portfolios.

“For a number of years, [ESG] was considered something akin to a Good Housekeeping Seal when someone’s doing their due diligence to see if they want to make an investment or not,” says Mike Reissig, chief executive officer of the Texas Treasury Safekeeping Trust Company (TTSTC), a division of the Comptroller’s office. “But I think over time, the environmental side of it started taking a little more precedence.”

In 2022, the oil and natural gas industry employed more than 347,800 Texans, representing about 37 percent of all industry employment in the U.S., according to the Texas Independent Producers and Royalty Owners Association. The industry contributed an estimated $322 billion to the state’s total gross domestic product that year, or 16 percent of the economy.

Despite the vital role of fossil fuels, in recent years executives from certain financial firms — perhaps most visibly the BlackRock Inc. investment management firm — have publicly contemplated divesting from this energy sector. (BlackRock Inc. is the world’s top asset manager, with about $8 trillion of assets.) Some have taken explicit steps. HSBC Holdings, one of the 10 largest banks in the world, announced it will not finance oil and gas projects approved in 2022 onward, as part of its support for a long-term net-zero emissions goal.

Certain state and local governments also are taking formal ESG positions. In 2021, the state of Maine passed legislation requiring its public pension system to divest completely from fossil fuels companies by 2026 — holdings that currently amount to $1.3 billion. That same year, trustees from two New York City pension funds representing the city’s teachers and other employees voted to divest $4 billion worth of fossil fuels industry holdings.


Concerned about the economic effect of ESG policies and recent moves by banks and investment firms to boycott or divest from fossil fuels, the 87th Texas Legislature passed SB 13 (PDF). The bill analysis says it prohibits certain state agencies from investing funds in financial companies taking “any action that is, solely or primarily, intended to penalize, inflict economic harm on or limit commercial relations with [an energy company that] does not commit or pledge to meet environmental standards beyond applicable federal and state law.”

The investment provisions of SB 13 apply to the following state entities:

  • Permanent School Fund.
  • Teacher Retirement System of Texas.
  • Employees Retirement System of Texas, which includes the Law Enforcement and Custodial Officer Supplemental Retirement Fund and Judicial Retirement System Plans 1 and 2.
  • Texas County and District Retirement System.
  • Texas Municipal Retirement System.
  • Texas Emergency Services Retirement System.

There are important and necessary exceptions. Notably, these agencies are not required to divest their investment holdings from financial companies identified as boycotters if doing so would obstruct the agency’s fiduciary duty (its obligation to act in the best interests of state and local government employees).

The measure also prohibits state agencies and other political subdivisions of the state from entering into a contract worth $100,000 or more for goods or services with companies that actively boycott energy companies.

Texas in 2021 passed its comprehensive legislation challenging the boycott of fossil fuels by global financial companies. Others have either enacted similar boycott laws or rules curbing ESG investing with public funds (Exhibit 1).


ARIZONA State Investment Policy Provides that the state treasurer will not consider ESG policies when evaluating investments. August 2022
FLORIDA SBA Resolution Provides that the State Board of Administration will not consider ESG policies in the state's retirement system investment policy. August 2022
IDAHO SB 1405 Prohibits the state or its political subdivisions from considering ESG investments in a manner that could override the state's prudent investor rule. July 2022
KENTUCKY SB 205 Requires the state treasurer to publish, maintain and update a list of financial companies that boycott energy companies, and requires state governmental entities to divest from the listed financial companies if they do not cease boycotting. April 2022
NORTH DAKOTA SB 2291 Prohibits the state investment board from investing state funds based on socially responsible criteria or for purposes other than maximizing returns. March 2021
OKLAHOMA HB 2034 The Energy Discrimination Elimination Act of 2022 requires the state treasurer to maintain and provide to each state governmental entity a list of financial companies that boycott energy companies and requires entities to divest assets of boycotting companies. November 2022
UTAH SB 97 Prohibits state and local government contracts valued at $100,000 or more with corporations, limited liability companies, partnerships, majority-owned subsidiaries and affiliates engaging in economic boycotting of fossil fuels energy, among other industries. March 2023
WEST VIRGINIA SB 262 Authorizes the state treasurer to publish a list of financial institutions engaged in boycotts of energy companies and exclude those institutions from the selection process for state banking contracts. June 2022

Note: May not represent an exhaustive list; additional states not included in the list have proposed, but not yet passed, similar legislation.
Sources: Morgan Lewis and state legislatures’ online bill search


In Texas, the core component of SB 13 is the list of financial companies that boycott oil and gas companies, which the Comptroller’s office must prepare and update. The Comptroller’s office also maintains a list of specific U.S. investment funds — collective accounts (e.g., mutual funds) for which fund managers, not investors, make decisions regarding how assets should be invested — that deliberately prohibit or limit investments in fossil fuels. To compile the lists, the Legislature has authorized the Comptroller’s office to use publicly available information about financial companies and investment funds and to request written verification from companies and fund managers stating they do not boycott energy.

Hegar explains that implementing SB 13 required an enormous amount of work by his staff, particularly at TTSTC. “[Developing the boycotters list] was a significant task that no one had ever done before,” he says. “We had to start at square one.”

But starting at square one has its advantages. Notably, it allowed the agency to develop an implementation process that aligns with Hegar’s guiding principles: transparency and objectivity. He says encouraging dialogue among state officials, financial sector executives and Texans can spark intellectually honest conversations about the roles of fossil fuels and renewable energy. “Our objective is to provide a brighter spotlight on the importance of the fossil fuels industry in our everyday lives, but without disparaging alternative energy industries and their place on Texas’ energy grid,” says Hegar.

When SB 13 went into effect on Sept. 1, 2021, TTSTC began sorting through thousands of publicly traded financial services, banking and investment companies (Exhibit 2). Using a combination of the following resources, it initially determined 19 banks and asset managers were potentially boycotting fossil fuels:

  • Global Industry Classification Standard and Bloomberg Industry Classification Standard — Widely accepted methods for grouping financial sector companies into standardized categories and subcategories to help financial market participants screen the industry’s companies and their competitors.
  • MSCI ESG Ratings Service — Quantitative and qualitative data that compare financial companies to their peers based on relevant ESG policies.
  • Climate Action 100 and Net Zero Banking Alliance/Net Zero Asset Managers Initiative — Public commitments or pledges whereby financial companies agree to implement requirements in business decisions to further global climate goals to cut greenhouse gas emissions to near zero by a certain date, usually 2050.

“Once we narrowed [the list] down to 19 companies, we sent [each] a follow-up questionnaire that took a deeper dive into their management’s role in evaluating oil and gas investments,” says Reissig.


Texas Governor Greg Abbott signs bill into law. Bill becomes effective. TTSTC conducts research to draft boycott list, beginning with thousands of publicly traded companies and finishing with 19 potential boycotters. Comptroller sends verification request letters to 19 financial companies seeking information about fossil fuels boycotting.
TTSTC uses verification request responses from the 19 financial companies to finalize the boycott list. Comptroller releases boycott list consisting of 10 companies. Comptroller sends letters to five state pension systems and the Permanent School Fund requesting they divest from companies on the boycott list. Comptroller updates the boycott list with one additional company.

Source: Texas Comptroller of Public Accounts


The Comptroller’s office published a list of 10 financial companies found to be boycotting the fossil fuels industry last August and added HSBC Holdings this March (Exhibit 3). The Comptroller’s office also has listed 350 investment funds determined to be boycotting the fossil fuels industry.


BLACKROCK INC. United States
UBS GROUP AG Switzerland

Note: Current as of Q1, 2023.
Source: Texas Comptroller of Public Accounts


Other statutes include the following:


The 87th Texas Legislature in 2021 passed SB 19 to prohibit state agencies and political subdivisions from contracting with companies endorsing discriminatory practices and policies aimed at firearm industries, including the ammunition industry, or firearm trade associations.


The 85th Legislature in 2017 passed House Bill 89 to prohibit certain state agencies and political subdivisions from contracting with companies that are either actively boycotting the nation of Israel or boycotting entities or persons doing business in Israel. It directs the Comptroller’s office to prepare, maintain and update a list of companies boycotting Israel, and it requires the state’s public pension systems and Permanent School Fund to divest any assets of boycotting companies. As of September 2022, there were 11 companies on the list.

Sources: Texas Legislature Online and Texas Comptroller of Public Accounts

An entity’s presence on the boycott lists does not mean it has ceased investing in fossil fuels entirely, or even plans to do so. “Because the law says a company can disadvantage oil and gas [by implementing a policy or practice] without any ‘ordinary business purpose,’ that company can be on the list and still invest in oil and gas,” says Reissig. For example, BlackRock Inc. remains invested in Texas’ public energy companies, according to testimony from the investment firm’s executives; however, the firm still has made “net-zero” public pledges and employs adversarial rhetoric regarding the fossil fuels sector, among other actions that satisfy the boycotting criteria developed by the Comptroller’s office.

That said, the list is not set in stone. A company or investment fund may be removed if the Comptroller’s office reviews new publicly available information suggesting it no longer boycotts the fossil fuels industry.

For the listing process to be transparent, the Comptroller’s office published answers to frequently asked questions (FAQs) that detail its methodology. The FAQs have been updated twice since the list first was published.


The process that the Comptroller’s office used to develop the boycott lists is subject to change, whether it’s due to legislative directives, additional information received or a review of other relevant financial practices. “When we compile a completely new list, which we haven’t done yet, we can make adjustments to the methodology,” says Reissig. For example, the Comptroller’s office may consider financial companies’ shareholder “voting by proxy” policies in the future.

Reissig explains that investors who buy shares in a mutual fund or another product from an investment company own the shares, but the company itself is the shareholder. As the shareholder, an investment company frequently may vote on proposals affecting operations and thus investors’ returns.

“If the company I bought my shares through decides as the shareholder it’s going to vote a certain way, it might be voting my ownership interest in a manner inconsistent with how I would have voted,” Reissig says.

The Comptroller’s office may update the boycott lists at any time as pertinent information becomes available. But regardless of how the lists evolve, Hegar says he will continue working to “protect the Texas economy and ensure the state has a diverse energy portfolio to meet the needs of our rapidly growing state.” FN

Texas has come a long way in diversifying its energy portfolio. Read about current energy needs and capabilities in the Fiscal Notes archives.