Following up on yesterday’s blogs on what’s new with anti-ESG – last year, Texas led a charge banning public entities like state pension funds from investing with entities that they viewed as being opposed to the fossil fuels industry. Texas Comptroller Glenn Hegar named over 10 firms and 300 funds that were added to a statewide “banned list” and other Republican-controlled states followed suit. Reporting from the Financial Times examines recent public investments and examines how the ESG ban may not be working as intended. The Financial Times discusses one such investment stating:
“a big investor in education in the oil-producing state pumped $300mn into a fund designed to subsidise the global energy transition away from fossil fuels.”
That investor was the Texas Permanent School Fund (PSF), a state fund that provides over $2 billion per year to fund public education. So how did a state entity become a clean energy fund’s largest investor in an energy transition fund in a state with an anti-ESG banned list? As the article points out, it is difficult for Texas to enforce its banned list.
There are a lot of sustainable and clean energy funds on the market, and putting them all on the banned list is a difficult task. The fund in this case, Macquarie Green Investment Group’s Energy Transition Solutions Fund, is not on the State’s banned list, making it a “legal” investment choice for PSF. Additionally, the Texas law didn’t grant the comptroller supervisory authority, leaving the state legislature as the enforcer.
The banned list is a great example of how the anti-ESG movement operates. There are often grand political gestures designed to scare market participants away from ESG. However, when met with resistance, such as court challenges, they rarely pan out as intended. While we shouldn’t write off anti-ESG altogether, it is worth acknowledging that it is a pet political project more than a lynchpin of the culture war. The lack of interest and support from the general public – combined with established investor demands – means the ESG genie cannot be put back in its bottle.
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