For centuries, the measure of a business’s success has been profits. Over the past decades, efforts have been made to retain talented workers with more perks and benefits. Then it was decided that corporations need to display a social conscience by supporting charities.
Today, there is a movement for companies to prioritize matters of Environment, Social and Governance (ESG). Investment in companies now hinges on its commitment to a clean environment, divisive social issues, and a diverse executive leadership. Companies are now using these criteria to evaluate other companies in their supply chain.
According to a report by the Center Square, the oil and natural gas in Texas industry has 480,460 jobs, which accounts for twenty-three percent of all jobs in that field. In 2024, Texas produced a record two billion barrels of oil.
Texas Attorney General Ken Paxton has had the vision to protect Texas oil businesses by prohibiting companies that boycott fossil fuel investments from doing business with state government agencies.
In 2021, Governor Abbott signed Texas Bill 13, which prohibited Texas government agencies and retirement funds from investing in companies and investment funds that boycott fossil fuel companies.
Naturally, retirement fund managers seek the most profitable funds for their investors.
The respected Texas Public Policy Foundation (TPPF) concluded that might not happen with ESG investments:
“The debate around Texas’ legislation highlights a broader national discussion on the role of ESG criteria in public investment and the importance of fiduciary duty—a legal obligation to prioritize the economic interests of beneficiaries, not ideological goals. The Center for Retirement Research at Boston College and the Committee to Unleash Prosperity have published findings that support the view that ESG investments can underperform compared to non-ESG investments and may introduce increased risks and reduced returns.”
TPPF also found states like California, Vermont, and Connecticut, which have embraced ESG criteria, often face criticisms for prioritizing political and social agendas over sound fiscal management. These states have enacted policies that encourage divestment from fossil fuels and heavy investment in renewable energy, potentially sacrificing robust financial returns for ideological satisfaction.
In 2023, A.G. Paxton issued an advisory letter on how to enforce the anti-ESG boycott provisions. It said, “companies that contract with governmental entities must verify in writing that they do not and will not during the term of the contract boycott energy companies; have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association; or boycott Israel.”
It is time for a thorough audit of all state contracts to ascertain that this clause is included, and that it is being followed.
Most recently, Gov. Abbott signed SB 2337 into law. This requires investment proxy advisors to inform shareholders when they are voting on questions that contain ESG issues.
Jack McPherrin of Heartland Impact recently testified before the Texas Senate State Affairs Committee. He said, “SB 945 prevents insurance companies and holding companies from including political shareholder proposals in proxy statements and from implementing politically driven shareholder proposals.”
“Ultimately, ESG-driven financial discrimination—whether carried out by investment firms or insurance conglomerates—imposes political orthodoxy at the expense of sound risk assessment, consumer choice, and economic vitality,” McPherrin continued:
“The common-sense provisions in this bill would go far in protecting the Texas economy and Texas companies from discrimination and denial of basic financial services. It would also ensure that radical activists, many from outside of this state and outside of this country, will not control the means of production and curtail the freedoms of each and every citizen of this state.”
Ken Paxton should be hailed for his foresight, not just for the oil industry, but also for ensuring that investors are completely aware of their options. Sound investment should take priority over ideologies that may run counter to that of a particular a company or an investor.
