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NextGen Magazine

 
 

Study: Texas Boycotts Some Funds Over ESG that Don't Qualify as ESG Funds

By:
S.J. Steinhardt
Published Date:
Sep 30, 2022

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A Texas official's decision to forbid the state from doing business with funds that espouse environmental, social and governance (ESG) values has also ensnared those that don't qualify as ESG funds., Bloomberg reported.

Based on a study conducted by Morningstar, Bloomberg reported that 14 percent of the 348 funds singled out by Texas Comptroller Glenn Hegar—almost one in seven—don’t qualify as ESG. Furthermore, almost four in 10 of those companies actually invest in the oil and gas industry that Hegar accuses them of boycotting, Bloomberg’s own data analysis found.

“The fact that many funds on the banned fund list hold companies involved in the oil and gas industry raises questions about the research done by the Texas comptroller on these investments,” Hortense Bioy, global director of sustainability research at Morningstar, told Bloomberg. “Clearly, these funds aren’t boycotting energy companies.”

In August, Hegar announced a list of the financial companies, asset managers and banks that he said boycotted oil companies, maintaining that the “environmental, social and corporate governance (ESG) movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients, but instead use their financial clout to push a social and political agenda shrouded in secrecy.”

That list included many well-known companies, including BlackRock, the world’s largest asset manager.

In response to a letter from 19 state attorneys general in August, attempting to force it to reconsider its ESG investing strategy, BlackRock Senior Managing Director Dalia Blass maintained that BlackRock's participation in ESG initiatives "is entirely consistent with our fiduciary obligations" to clients, Yahoo! Finance reported. She also wrote that climate change poses real risks and opportunities for investors, a view that is “by no means unique.”