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Texas Identifies Financial Companies Targeted For Divestment Due to "Energy Boycott"

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. 

Texas Comptroller Glenn Hegar announced today his list of financial companies that boycott energy companies. Listed companies are subject to the divestment provisions outlined in Texas Government Code Chapter 809, which defines a financial company as a publicly traded financial services, banking or investment company. The publication of the list, maintained by the Comptroller’s office, follows an exhaustive period of research and process development.  The initial list includes 10 financial companies. Additionally, Comptroller staff conducted research on individual investment funds, generating a list of nearly 350 funds that are subject to the same provisions as the companies.

 

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume XII, Number 241
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About this Author

Jacob Hupart Commercial Attorney Litigation Mintz Levin Cohn Ferris Glovsky and Popeo PC
Member

Jacob has a multifaceted litigation practice that encompasses complex commercial litigation, including cases involving securities, employment, and environmental claims, as well as class action litigation, white-collar criminal defense, and regulatory investigations. He has extensive experience handling all phases of litigation before federal and state courts, managing discovery, and conducting settlement negotiations. Jacob has represented clients in a variety of industries, including financial services, energy, education, and the media.

Prior to joining Mintz, he was an associate...

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