Texas is banning state and local government agencies from doing business with financial firms that they say are “boycotting” the gun and fossil fuel industries. It’s a move other Republican-led states are following. But experts say the move in Texas already is costing taxpayers hundreds of millions of dollars.
Republican Texas State Representative Phil King introduced his bill, HB 2189, a year ago last April, saying it would stop Wall Street firms from “discriminating” against the fossil-fuel industry.
“Wealthy investment managers are denying capital to energy companies, wielding their money and power with one simple goal, destroying the oil and gas industry. This bill sent a strong message to both Washington and Wall Street that if you boycott Texas energy, then Texas will boycott you,” King said to the House State Affairs Committee.
King’s bill, and its senate companion SB13, prohibits Texas agencies from investing in companies that have adopted policies that prohibit investing in some fossil fuel companies because of the financial costs of climate change and the environmental risk of drilling in the Arctic.
Minutes later the same committee heard a proposal for a similar bill from Republican State Representative Giovanni Capriglione. This one was aimed at punishing firms divesting from the gun industry.
“I’m here to speak to you today about House Bill 2558 which prevents firearm lending discrimination by banks. This bill is supported by the National Shooting Sports Foundation and the National Rifle Association,” Capriglione said.
The senate version of the bill was SB19 Capriglione argued cutting off capital and banking services to the gun industry threatens the Second Amendment.
Both these bills passed and Texas Gov. Greg Abbott signed them into law. They’re aimed at ESG — or Environmental, Social and Governance policies. These are policies, companies say, that are good business because they address the risks they face from things like climate change and school mass shootings.
But Texas Comptroller Glenn Hegar called ESG’s an opaque and perverse system where financial companies use their clout to push a social and political agenda.
Last week Hegar banned 10 firms from doing business with Texas after he determined that they did not support the fossil fuel industry enough — including Blackrock and Goldman Sachs.
“The result is, it's costing Texans,” said Daniel Garrett of the Wharton School at the University of Pennsylvania. He studied the impact of Texas’ Anti-ESG laws on the state’s municipal bond borrowing.
Garrett said the top five lenders left the Texas municipal bond market because they wouldn't support the manufacturing of AR-15 style weapons — the kind of gun used in the Uvalde school massacre.
“The banks definitely think they're having an impact. They think these policies are worth leaving Texas over,” he said.
Garrett estimates the Texas laws have reduced competition and cost Texas taxpayers an extra $300 to 500 million so far this year in extra interest. Still, those firms are sticking with their ESG policies.
