State of Texas cuts ties with Environmental and Social Governance companies

HOUSTON, Texas (KTRK) -- If a financial company does not invest in oil and gas, it can't do business with the state of Texas. It's a law passed during the last legislative session and it targets companies that the state defines as boycotting oil and gas. Even though, some suggest it is little more than playing politics in an election year.

Oil and gas are a financial pillar in Texas. Upwards of 200,000 Texans make their living in the industry, and the Republican-led legislature passed a law to help protect those jobs and that part of the energy industry.

"This law was a way for Texas Republicans to show that they were on the side of the oil and natural gas industry, which is one of Texas' most important industries," Baker Institute Political Fellow Mark Jones said. "The real goal of this law was to signal to Texas voters, as well as people nationally, that the state of Texas was going to fight for the oil and natural gas industry and the jobs and the income that it represents for the state of Texas."

The law prevents any state entity, including pension funds, from doing business with a financial firm or bank that boycotts oil and gas.

More specifically, it targets companies that practice what's known as Environmental and Social Governance, a process of screening investments based on corporate policies and which encourages companies to act responsibly.

The office of State Comptroller Glen Hegar came up with a list which, right now, includes 10 companies that are no longer allowed to do business with the state.

"You have a substantial trend of not investing in the oil and gas industry," Hegar told ABC13, "and as listeners know in the Houston area, that is an important part of not just the Houston economy, the Texas economy, but really the global economy."

Katie Mehnert, who's the CEO of ALLY Energy, says the law is gamesmanship.

"My view is it's political pandering," she said. "The government has no role in this, particularly in state government and particularly in our state where energy, and all energy, matters. So fossil fuels matter for the state economy and so do renewables. And Texas leads the way."

While the state does make exceptions if the move would unnecessarily harm an agency or pension, the head of the Texas branch of the American Federation of Teachers, Zeph Capo, doesn't like the trend.

"This short-term thinking is really quite concerning for the retirees," Capo said. "The people who depend on the retirement systems to make the best fiduciary decisions."

Hegar defends the practice as critical to Texas' future.

"If you don't invest in oil and gas, a lot of the fabric, the basic parts of the daily lives that we operate on, regardless of the industry that you work in and work for really those things deteriorate," Hegar said.

The list is fluid. It can change as frequently as every quarter. And more discussion about the issue is expected in the next session, which begins in January.

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