At the annual meetings of at least four financiers — Bank of America, Citigroup, Goldman Sachs, and Wells Fargo — the Employee Retirement System (ERS) of Texas voted in favor of net-zero financing proposals on behalf of its nearly 400,000 members.
The net-zero policies were put forward by Environmental, Social, and Governance-focused (ESG) asset management firms and one environmental group. The Bank of America proposal was introduced by Trillium Asset Management; Citigroup’s by Harrington Investments and Boston Asset Management; and both Goldman Sachs’ and Wells Fargo’s were introduced by the Sierra Club, one of the nation’s foremost environmental groups.
ESG is a grading system used to judge companies for investment potential. The more a corporation toes the line of its environmental and social policy metrics, the higher grade it’ll receive and the more capital it is likely to receive.
“Climate change is a global challenge that continues to gain widespread attention for its numerous, significant environmental and social impacts,” reads the Bank of America proposal. “Fossil fuels are hot button political and significant policy issues, because of their impacts on the global climate, local environments, and human rights.”
“Shareholders request the Company…ensure[s] that its financing does not contribute to new fossil fuel supplies.”
Any shareholder that meets the Securities and Exchange Commission’s requirements may submit their own proposal.
The company boards each recommended a vote against the respective measures. All four failed by overwhelming margins.
ERS spokeswoman Mary Jane Wardlow told The Texan, “We became aware of the issue late last week and were in contact with our proxy advisor, Institutional Shareholder Services, to resolve the matter going forward.”
That proxy advisor votes on behalf of the pension system within the agency’s policy guidelines. Institutional Shareholder Services did not respond to an inquiry by the time of publishing.
“Our new [Chief Investment Officer], who took office last fall, had already identified the proxy voting process as an area that needed to be examined and has formed a committee to review it regularly and make recommendations for improvement.”
ERS said it is not aware of any other such instances.
The Texas Public Policy Foundation (TPPF) first called attention to the votes in a Monday morning release.
“The policy states unequivocally that the fund will do what is in the best interest of ERS’ participants and beneficiaries and will not vote to endorse specific social policies,” said Jason Isaac, Director of TPPF’s Life:Powered initiative.
“By adopting a proposal to prohibit investment in fossil fuels, ERS is violating its own rule to consider only what will protect and improve the economic value of fund. But the risk doesn’t just affect investors. If ERS fails because it took positions detrimental to its economic health, then taxpayers are on the hook.”
After TPPF exposed the votes, Lt. Governor Dan Patrick released a statement saying, “I am outraged by news that the Employee Retirement System of Texas (ERS) has voted by proxy for numerous shareholder resolutions that go against the spirit of laws passed by the 87th Texas Legislature. Moving forward, ERS has pledged to review and modify its voting policies with its voting proxy to address my concerns.”
“Our various investment funds’ focus should be on getting the best return on their funds. If companies they invest in take positions that harm Texas, they need to re-evaluate those investments.”
The ESG movement is rushing through corporate boardrooms across the nation, including in Texas’ vaunted oil and gas industry.
Last year, the legislature passed Senate Bill (SB) 13, which prohibits state pension investments from going to companies divesting from fossil fuels. Currently, the Texas comptroller is evaluating 19 companies for harboring oil and gas divestment policies and over 150 more for providing fossil fuel-boycotting investment funds.
The office is in the process of forming a list of entities running afoul of SB 13 from which to pull the state’s billions of dollars in pension investments.
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Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.