TEXAS: Texas attorney general Ken Paxton’s office says it’s reviewing whether 10 financial companies, including Bank of America Corp and JPMorgan Chase & Co, violate a Republican-backed state law that punishes firms for restricting their work with the oil and gas industry because of climate change concerns.

The probe pertains to companies that are members of groups seeking to reduce greenhouse gas emissions, the office said in a letter to bond lawyers last week.

The office announced that it was reviewing companies that are members or affiliate members of the Net-Zero Banking Alliance, Net-Zero Insurance Alliance, Net-Zero Asset Owner Alliance or Net-Zero Asset Managers.

“This office is reviewing whether companies or any affiliates that are members of a Net-Zero Alliance are companies that boycott energy companies in violation of Senate Bill 13,” Leslie Brock, assistant attorney general, said in the letter.

The probe is one of Paxton’s first major actions since his return to the attorney general’s office after facing impeachment proceedings earlier this year.

He was cleared of 16 articles of impeachment alleging corruption and bribery last month after being charged by the state’s Republican-led House of Representatives.

Paxton said last Wednesday that he asked his public finance division to take “proactive measures” to ensure companies comply with the state’s anti-boycott laws.

“The office of the attorney general will continue to vigorously enforce our laws that prevent taxpayer funds from going to companies whose environmental, social and governance policies harm Texans or key Texas industries,” Paxton said in an emailed statement.

“Companies who discriminate against firearms businesses and organisations, the oil and gas industry, or the nation of Israel will not enjoy the opportunity and privilege of winning public contracts in Texas.”

Paxton said in an advisory that issuers should do their own due diligence on the companies they enter into contracts with, and not just rely on written verifications.

“Lists of boycotters and discriminators maintained by the attorney general and the comptroller of public accounts are not exhaustive lists of companies that are in violation of state law,” the advisory said.

“These lists should be a starting point – not the end-all” in determining whether a company is a boycotter or a discriminator under state law.

The Net-Zero Banking Alliance, convened under the United Nations, includes a group of banks that have committed to “financing ambitious climate action to transition the real economy to net-zero greenhouse gas emissions by 2050.”

More than 130 banks are members of the alliance, according to its website.

Eight coalitions

The alliances covered in the review are among the eight climate finance coalitions within the Glasgow Financial Alliance for Net-Zero (GFANZ), which is comprised of coalitions representing all corners of the finance industry including banks, asset managers and asset owners.

GFANZ is co-chaired by Mark Carney, who has been named chairman of Bloomberg Inc’s board and is a former Bank of England governor, and Michael R. Bloomberg, the founder of Bloomberg News parent Bloomberg LP.

Members or affiliate members of those initiatives include Bank of America, Barclays Plc, JPMorgan, Morgan Stanley, RBC Capital Markets and Wells Fargo & Co, the attorney general’s office said.

The banks are major underwriters in the US$4 trillion state and local debt market.

They face the potential of losing out on public finance business in Texas, which is the biggest market for municipal bond sales so far in 2023.

Already, UBS Group AG, another major bank, is on a list of companies that the state comptroller determined violated the law. That hurt the company’s public finance business in Texas.

Separately, Citigroup Inc is no longer underwriting Texas municipal-bond deals because of its firearm policies – the consequence of another Grand Old Party, as the Republican Party is also known, law passed in 2021.

The attorney general’s office said it would provide guidance and “steps that may be taken to avoid market disruption” if a company is found to be in violation of the legislation.

“We make business decisions based on client needs and the specific circumstances clients present to us,” Bill Halldin, a Bank of America spokesperson, said in an emailed statement.

A JPMorgan representative said the bank doesn’t boycott energy companies.

“We make our own business decisions and do not relinquish decision making over these matters to third party organisations,” the bank said in a statement.

Spokespeople for Wells Fargo and Barclays declined to comment. Representatives for the other banks didn’t respond. — Bloomberg