Representatives from at least five companies have asked the office of state Comptroller Glenn Hegar to remove them from the divestment list he published in August, arguing that they shouldn’t have been included to begin with, according to documents Bloomberg obtained through a public records request.
The efforts underscore how crucial Texas’ booming economy and population are as a source of growth for the finance world. Firms on the Republican comptroller’s list may struggle to win underwriting business from the state’s myriad issuers of municipal debt or gain access to entities like the Teacher Retirement System of Texas.
“We believe your determination is incorrect and is contradicted by verifiable public information,” BlackRock head of external affairs Dalia Blass and chief client officer Mark McCombe wrote in an October 3 letter to Hegar. “BlackRock does not boycott energy companies” under the relevant state code.
As mandated by a law that the Texas Republican-controlled legislature passed last year and that took effect in September 2021, Hegar’s office released a divestment list of 10 companies in late August – including UBS and BlackRock – as well as more than 300 individual funds.
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Hegar’s task was to prepare a list of firms that his office deems “boycott energy companies” – a pillar of the state’s economy – under the Texas law. The entities then risk losing access to business with certain state governments and organizations.
The state’s importance for banks and asset managers is only growing. In October, Wells Fargo & Co chose a Dallas suburb for a new campus, and Goldman Sachs also plans to expand in the area.
BlackRock’s McCombe scheduled an Oct. 20 meeting with representatives from Hegar’s office in Austin to discuss the investment giant’s inclusion on the list, email records show.
Meanwhile, Tom Naratil, co-president of UBS Global Wealth Management until last month, submitted a clarification letter regarding the list in September. A UBS spokesperson told Bloomberg in October that the firm met with the comptroller’s office and reiterated the importance of the energy industry and Texas. UBS said last month that it provided more information showing, “it is both our policy and practice to do business with energy companies, including those in the fossil fuel industry.”
UBS Group’s arm that underwrites US municipal bond sales hasn’t handled any offerings in Texas’ lucrative market for state and local-government debt since Hegar announced his findings, and was removed from a $3.4 billion transaction slated to price next year.
“We are actively working with the authorities in Texas to reinforce the importance of the energy industry and Texas to our business,” Erica Chase, a UBS spokesperson, said in a statement. “UBS does not boycott the energy industry.”
BlackRock didn’t respond to Bloomberg requests for comment on the correspondence with Hegar’s office.
The comptroller’s office is required to update the divestment list annually, but may do so as often as quarterly. Last week, a spokesperson for Hegar said any update would come next quarter at the earliest.
Other companies with funds on the list, including Bank of New York Mellon, have also sought clarification. The bank’s investment-management division has 19 funds listed.
Bank of New York Mellon said in an August letter to Hegar’s office that, “we believe the inclusion of these funds was made in error and is inconsistent with the information we provided in response to the verification request.”
In a statement last week, the bank said it doesn’t have a policy of boycotting energy companies, and that it engaged with Texas officials to clarify its funds’ investment processes.