Texas Expands Divestment List to Include NatWest Over Alleged Energy Boycott
The Texas Comptroller’s office has placed UK-based financial services giant NatWest on a growing list of financial institutions that could face divestment by state pension funds. It comes after accusations that the bank is “boycotting” oil and gas companies, placing the bank in the crosshairs of Texas’s aggressive anti-ESG stance.
It is the biggest net supplier of energy in the United States; hence, the role played by Texas in the country’s energy cannot be underscored. According to the U.S. Energy Information Administration, it accounts for close to 25% of the nation’s domestically produced energy and more than 40% of its crude oil proved reserves and production. Given this huge stake, financial practices that Texas has judged inimical to the fossil fuel industry—a bedrock of its economy—have seen no quarter being given by the Lone Star State.
It was initially published in 2022 by Texas Comptroller Glenn Hegar and targeted the ten largest financial companies in the world, which included BlackRock, BNP Paribas, Credit Suisse, and UBS. Now it includes 16 companies, with HSBC, Credit Agricole, Impax Asset Management, and Societe Generale added to the list of financial heavyweights.
NatWest has been added to the blacklist following a dramatic shift in the bank’s policies on financing oil and gas industry activity. Last year, NatWest told investors that it would not provide reserve-based lending to new customers exploring for, extracting, and producing oil and gas. It also announced that it would not renew, refinance, or extend existing reserve-based lending for such purposes beyond 31 December 2025. That policy change was the reason cited by the Texas Comptroller’s office for placing NatWest on its divestment list, a spokesperson said.
Texas requires the Comptroller to maintain and periodically update a list of financial companies determined to be boycotting energy companies under its law. Once a company has been placed on that list, they have 90 days to cease any practice viewed as discriminatory towards the energy sector in order to avoid state governmental entities divesting from them. As proposed, this law would be attuned towards state financial dealings supporting support for fossil fuel production, safeguarding the interests of the robust energy industry of Texas.
While Texas has been leading the charge on the anti-ESG movement, its efforts have been widely controversial. Detractors say the financial consequences of such actions could be severe. A study by the Texas County & District Retirement System estimated that this law—prohibiting ESG investing within the state’s public retirement investment system—could cost upwards of more than $6 billion in lost returns over the next decade. This legislation can also restrict the system from partnering with top-tier investment managers, thus affecting pension fund performance for the state.
The broader argument on ESG principles in investment decisions is only getting stronger, with proponents touting it as a must-have in investment decisions if investors want to take control of long-term risks and ensure sustainable returns. However, the opponents, especially in states like Texas, insist that ESG practices create room for discriminatory actions against major industries like oil and gas, which are the lifeblood of those states’ economies.
As this drama plays itself out, Texas becomes the latest in a long line of states to make it clear that more banks will be added to this divestment list if they institute policies the energy sector deems hostile. For NatWest and others on the list, the next 90 days are crucial. These institutions will now either have to change their policies or suffer financial losses from the biggest energy-producing state in the U.S.
Given this backdrop, the Texas move shows Republican-led states have been actively seeking to fight against ESG investing due to it being labeled a threat to conventional energy sectors. As more and more states join the anti-ESG movement, this could continue polarizing the financial environment, with companies in the crossfire caught between the pressures of convolution in political and economic matters. What happens in Texas, with divestment, may very much be the standard that other states use in the conjunction of finance, energy, and environmental policy, literally redefining the future of ESG investing and the U.S. fossil fuel industry.