Texas Bill Would Divest State Funds from Companies that Shun Fossil Fuels

A bill filed in the Texas Senate, Senate Bill 13 (SB 13), would direct the state’s investment funds to divest from any companies that “boycott” fossil fuels.

Texas is the largest producer and refiner of crude oil in the United States. SB 13, filed by state Sen. Brian Birdwell (R-Granbury) and four other Republican state senators, is seen as a response to efforts by environmental activist within institutional investor industry to encourage companies and stock funds to divest from and cease doing business with companies that produce, refine, deliver, and sell coal, gas, and oil. Most prominent among these is the world’s largest investment asset manager BlackRock. BlackRock’s Chairman Laurence D. Fink announced in his annual letter to CEOs in January that the fund manager is committed to achieving net-zero greenhouse gas emissions by 2050, will focus its investment strategy on companies that do the same by deemphasizing companies in the fossil fuel industry, and is urging other companies and funds to do the same.

Fighting Divestment with Divestment

Birdwell’s bill would require state pension and retirement funds to divest from companies that refuse to invest in or do business with companies in the fossil fuel industry.

Funds cited in and covered by SB 13 include the: $165 billion Texas Teacher Retirement System; $35.7 billion Texas County & District Retirement System; $35.2 billion Texas Permanent School Fund; $31.5 billion Texas Municipal Retirement System; $30.9 billion Texas Employees Retirement System; and the $116 million Texas Emergency Services Retirement System.

The bill directs the Texas comptroller to “prepare and maintain, and provide to each state governmental entity, a list of all companies that boycott energy companies.” The funds are then required warn the companies on the comptroller’s list they are on it, and have 90 days to alter their anti-fossil fuel investment strategies. If the companies and funds fail to alter their policies banning investment in companies in the fossil fuel industry, the law specifies the state funds “shall sell, redeem, divest, or withdraw all publicly traded securities of the company.”

If a state fund determines divesting from a particular company would cause its portfolio to lose value, it can submit such information in a written report to the comptroller, the Legislature, and the Texas attorney general, and request an exemption from the divestment law. In addition, the law disallows companies, retired beneficiaries, and others from suing the state over decision to divest.

High Priority

The Texas Tribune says SB 13’s low number indicates state legislators have placed a high priority on passing the bill. Historically, the lower the number a bill is assigned, the greater its likelihood of being fully vetted and passed by the legislature during its short bi-annual session.

Commenting on the likelihood of success for a divestment bill, Lt. Gov. Dan Patrick told the Austin American-Statesman enacting legislation to prohibit the state from doing business with firms that “boycott” oil and gas companies was a priority and will “pass easily.”

H. Sterling Burnett, Ph.D. (hsburnett@heartland.org) is the managing editor of Environment & Climate News.