Texas’ retirement system has voted for green proposals banning loans to fossil fuel companies
At annual meetings of at least four financiers — Bank of America, Citigroup, Goldman Sachsand Wells Fargo – Texas Employees Retirement System (ERS) voted in favor of net zero funding proposals on behalf of its nearly 400,000 members.
The net-zero policies have been proposed by asset management firms focused on environment, social and governance (ESG) and an environmental group. The Bank of America proposal was introduced by Trillium Asset Management; Citigroup by Harrington Investments and Boston Asset Management; and both Goldman Sachs’ and Wells Fargo’s were introduced by the Sierra Clubone of the nation’s leading environmental groups.
ESG is a rating system used to assess companies based on their investment potential. The more a company follows the line of its environmental and social policy parameters, the higher it will receive a rating and the more capital it is likely to receive.
“Climate change is a global challenge that continues to garner widespread attention due to its many significant environmental and social impacts,” reads Bank of America’s proposal. “Fossil fuels are hot political issues and important political issues, due to their impacts on the global climate, local environments and human rights.”
“Shareholders ask the Company… to ensure[s] that its funding does not contribute to new supplies of fossil fuels.
Any shareholder who meets the requirements of the Securities and Exchange Commission terms can submit their own proposal.
The company’s boards have each recommended a vote against the respective measures. All four failed by overwhelming margins.
ERS spokeswoman Mary Jane Wardlow said The Texan“We became aware of the issue late last week and have been in contact with our proxy advisor, Institutional Shareholder Services, to resolve the issue moving forward.”
This proxy advisor votes on behalf of the pension system within agency policy guidelines. Institutional Shareholder Services did not respond to a request at the time of publication.
“Our new [Chief Information Officer]who took office last fall, had already identified the proxy voting process as an area that needed review and formed a committee to review it regularly and make recommendations for improvement.
ERS said it was not aware of any other such cases.
The Texas Public Policy Foundation (TPPF) first drew attention to the votes on a Monday morning Release.
“The policy unequivocally states that the fund will do what is in the best interest of ERS participants and beneficiaries and will not vote to approve specific social policies,” said Jason Isaac, director of the Life:Powered Initiative at TPPF.
“By adopting a proposal to ban fossil fuel investments, ERS violates its own rule of only considering what will protect and enhance the economic value of the fund. But risk doesn’t just affect investors. If ERS fails because it has taken positions that are detrimental to its economic health, then taxpayers are responsible.
After TPPF revealed the votes, Lt. Governor Dan Patrick released a statement saying, “I am outraged by the news that the Texas Employees Retirement System (ERS) has voted by proxy for numerous shareholder resolutions. that go against the spirit of laws passed by the 87th Texas Legislature. Going forward, ERS is committed to reviewing and changing its voting policies with its voting proxy to address my concerns.
“The objective of our various investment funds should be to obtain the best return from their funds. If the companies they invest in take positions that harm Texas, they must re-evaluate those investments.
The ESG movement is rushing into corporate boardrooms across the country, including in Texas’ vaunted oil and gas industry.
Last year the legislature voted Senate Bill (SB) 13, which prohibits state pension investments from going to companies that divest from fossil fuels. Currently, the Texas Comptroller is evaluating 19 companies to house oil and gas divestment policies and more 150 more to provide investment funds boycotting fossil fuels.
The bureau is forming a list of entities violating SB 13 from which to withdraw the state’s billions of dollars in retirement investments.