The Office of the Attorney General ("OAG") has announced that Barclays will no longer be allowed to underwrite Texas's municipal bonds due to its failure to provide information regarding its "net zero" carbon emissions commitments. The OAG had sent a letter to all bond counsel on November 1, in which Barclays was identified as a member or affiliate of the Net Zero Alliance while also having a standing letter with the OAG. This raised concerns about whether Barclays' activities could classify it as a "fossil fuel boycotter" under Texas law.
Barclays was asked to provide more details about its environmental, social, and governance (ESG) commitments, but it chose not to respond. By not responding, Barclays acknowledged that it would likely forfeit its ability to contract with Texas governmental entities. As a result, in accordance with Texas law, the OAG's Public Finance Division issued a letter stating that no public security issued on or after the date of the letter would be approved if Barclays purchased or underwrote it or was otherwise a party to a covered contract relating to the public security.
Attorney General Ken Paxton has been steadfast in enforcing Texas laws that protect vital industries from ESG policies imposed by major corporations. These policies have the potential to weaponize the financial industry against the state's interests. In fact, a recent investigation by Attorney General Paxton led to a major financial services company abandoning ESG ratings altogether.
"The Office of the Attorney General will continue to vigorously enforce our laws that prevent taxpayer funds from going to companies whose 'ESG' policies harm Texans or key Texas industries," Attorney General Paxton stated.
The OAG is committed to upholding Texas law and ensuring that the state maintains the best municipal bond market in the country. The OAG will work with potential underwriters and issuers to ensure compliance with Texas law.
Barclays' ineligibility to participate in Texas's bond market serves as a reminder that companies must be transparent about their ESG commitments. Failure to do so can have consequences, even for major financial institutions.