Texas legislature passes anti-ESG bill

A bill that would prevent Texas from investing in environmental, social, and governance financial products that boycott Texas energy companies has been passed by the state’s legislative bodies and awaits the signature of Republican Gov. Greg Abbott.

If enacted, the law would affect the state’s six pension funds, including the Employees Retirement System and the Teacher Retirement System of Texas, which manage over $200 billion.

Under the law, Texas’ public pension funds would be required to “sell, redeem, divest, or withdraw all publicly traded securities of [any] financial company” that “boycott[s] energy companies.” The bill defines “boycott[s] energy companies” as “refusing to deal with, terminating business activities with, or otherwise taking any action that is, solely or primarily, intended to penalize, inflict economic harm on, or limit commercial relations with a company because the company: engages in the exploration, production, utilization, transportation, sale, or manufacturing of fossil fuel-based energy and does not commit or pledge to meet environmental standards beyond applicable federal and state law; or does business with a company described [above].”

The bill provides an exemption for the state pension funds from having to divest “indirect holdings in actively or passively managed investment funds or private equity funds” or where divestiture would be “inconsistent with its fiduciary responsibility.”

[More: Shareholder victory over Exxon emboldens ESG supporters]