Texas puts NatWest on divestment list over energy company ‘boycott’

UK-based financial services group NatWest has been added to a list published by the Texas Auditor General of financial companies that could face divestment by the state's pension funds because of the “boycott” of oil and gas companies.

The growing list is part of an ongoing anti-ESG movement in Republican states, with Texas among the most active in recent years. Texas is the U.S.'s largest net energy supplier, providing nearly a quarter of the country's domestically produced energy, according to the U.S. Energy Information Administration (EIA). In addition, over 40% of the country's proven crude oil reserves and production come from Texas.

The divestment list was first published in 2022 by Texas Comptroller Glenn Hegar and initially targeted ten financial firms, including BlackRock, BNP Paribas, Credit Suisse, Danske Bank, Jupiter Fund Management, Nordea Bank, Schroders, Svenska Handelsbanken, Swedbank and UBS, in addition to hundreds of individual funds.

With the addition of NatWest, the list has now grown to 16 companies and also includes AMP, HSBC, Credit Agricole, Impax Asset Management, Rathbones and Societe Generale.

According to a FAQ published by the comptroller's office, a Texas law requires the comptroller to maintain and update a “list of financial firms that boycott energy companies.” The law gives companies 90 days to “cease boycotting energy companies to avoid being eligible for divestment by state agencies.”

In an emailed statement from the Audit Office to ESG Today, a spokesperson said the decision to add NatWest to the list was made due to “changes in NatWest Group’s funding policy in relation to the oil and gas industry.” The spokesperson referred in particular to NatWest’s policy, which states:

“Beginning in February 2023, we will no longer provide reserve-based loans to new customers specifically to finance the exploration, production and production of oil and gas, and after December 31, 2025, we will not renew, refinance or extend existing reserve-based loans specifically to finance the exploration, production and production of oil and gas.”

While Texas is becoming increasingly active in addressing ESG, there are also headwinds over the costs and estimated lost returns likely to result from anti-ESG initiatives. For example, a 2023 assessment by the Texas County & District Retirement System (TCDRS), which analyzes a proposed bill banning ESG investments in the state's public pension investment system, estimates that the law could cost the pension system more than $6 billion in lost returns over ten years and discourage the system from partnering with top investment managers.