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Companies that divest from fossil fuel could face a state boycott in Texas

AILSA CHANG, HOST:

As threats from climate change grow, big financial firms are betting on the energy transition. But that shift to climate-conscious investing has also provoked a conservative backlash, as Mose Buchele from member station KUT in Austin reports.

MOSE BUCHELE, BYLINE: Ivan Frishberg is the chief sustainability officer at Amalgamated Bank. That means part of his job is to keep the bank from putting money in fossil fuel companies that contribute to global warming. For him, it's just smart financial policy.

IVAN FRISHBERG: Banks and asset managers are modeling capitalism and free markets and moving money away from things that we know are inherently risky and to where the market wants it.

BUCHELE: Forsberg says about 10% of all investments in the world are now in some kind of environmental or socially aligned fund, and big financial firms like BlackRock have attracted investors and positive media coverage by touting these strategies. But last year, when BlackRock CEO Larry Fink wrote a letter advising companies to prepare for a zero-carbon world, there were some places where the reaction was not so positive.

JASON ISAAC: To see companies taking that position, I really felt like this was an anti-Texas narrative.

BUCHELE: This is Jason Isaac. He heads the Texas Public Policy Foundation. It's an influential think tank that opposes efforts to fight climate change, and gets millions of dollars from fossil fuel interests. Isaac says, a few years ago, he started hearing complaints from people in the industry about banks betting on the energy transition.

ISAAC: When you can't get access to capital, it's harmful to these industries. You need to push back.

BUCHELE: He says they asked for his help. Isaac is a former Texas state representative, so he wrote a model bill and passed it to lawmakers, a fact the watchdog group Documented brought to the attention of NPR. Basically, the bill says the state of Texas cannot do business with financial groups that divest from fossil fuels. The goal, Isaac says, is to get these banks and investment firms to change their policies.

ISAAC: This is, I think, a responsible way to push back that says, hey, look, if you're going to be anti-Texas, then you're not going to get to do business with Texas.

BUCHELE: Last year, the bill was signed into law. Now, the Texas Comptroller's Office is creating a list of companies that could face a state boycott. In the long run, it could even mean that Texas pulls billions in pension funds and school endowment money from some of the country's biggest investment firms, including BlackRock. The whole thing has a lot of people very nervous. Here's how Thomas Sanzillo, the former state comptroller of New York, describes it.

THOMAS SANZILLO: A very bad precedent, very bad precedent.

BUCHELE: Sanzillo now works for the Institute for Energy Economics and Financial Analysis, a group that supports the transition away from fossil fuels. But he says when he was in state government, he would oppose any effort by lawmakers to intervene in matters of investment.

SANZILLO: Whether we liked it or didn't like it, we would oppose it because the legislature and the governors should have no say in the running of the fund.

BUCHELE: In this case, he thinks the move could also jeopardize state money. That's because even though energy prices are high right now, oil and gas has provided a bad return on investment for years. But the goal of pushing companies to a more fossil friendly position, at least publicly, appears, to be working. BlackRock representatives have met with Texas state leaders highlighting their fossil fuel investments. CEO Fink also wrote a letter this year, flatly stating that the firm does not pursue fossil fuel divestment. Here's Amalgamated Bank's Ivan Frishberg again.

FRISHBERG: You can already see that they've now written back to the state and said, hey, hey, hey, don't worry. We love you guys. We're open for business. You know, bring us your oil and gas.

BUCHELE: BlackRock did not respond to a request for comment. Meanwhile, similar bills to punish fossil fuel divestment have been introduced in other states, including West Virginia, Louisiana and Oklahoma. But Frishberg says one thing these laws won't change is the reality of global warming. The smart money, he says, will move to minimize the risk.

For NPR News, I'm Mose Buchele in Austin. Transcript provided by NPR, Copyright NPR.