On August 24, 2022, the Texas Comptroller published a list of ten financial companies (only one of which is U.S.-based) and approximately three hundred and fifty funds that, pursuant to Texas law, all state governmental entities (e.g., the various Texas pension funds) must now divest from. This action follows directly from the law recently passed in Texas, which prohibits Texas government entities from dealing with financial companies that “refus[e] to deal with . . . compan[ies] because the company . . . engages in the exploration, production, utilization, transportation, sale, or manufacturing of fossil fuel-based energy.” In other words, if Texas decides that a financial company is refusing to engage with the oil-and-gas sector, then the Texas state government will prohibit business dealings with that financial company–a variation of a reverse boycott.
This action is merely the latest salvo in the continuing efforts by states focused on fossil fuels (e.g., West Virginia, Oklahoma, Texas) to combat the increasing focus by investors and financial companies on the transition away from fossil fuels to clean energy. These states are attempting to exert economic pressure to slow, or even stop, the actions taken by financial companies to withdraw support from the fossil fuel industry. Indeed, just last month, the West Virginia state treasurer announced a boycott of five financial companies for limiting investment in coal. (It is also worth noting that Texas and West Virginia have identified largely separate lists of companies–only one investment firm appears on both lists.)
While expected, this action by Texas may prompt an increasing separation in the financial world between firms that are willing to conduct business with fossil fuel companies and those that are not. Such a bifurcation in the economy, should it occur, would likely impose increased costs on entities on both sides of this environmental and energy divide.