In a guidance letter, the firebrand conservative said it was the responsibility of governmental entities across the state to make sure they were not doing business with companies that might break the state's anti-boycott laws regarding Israel and energy companies, or that discriminate against the firearms industry.
Given the recent Hamas attack against Israel, "it is more important than ever to enforce public policy supportive of one of America's closest allies and a beacon of freedom in the Middle East," Paxton said.
While state governmental entities are not obligated to complete full due diligence on their business partners, they "may not blindly rely on written verifications when evidence is readily and publicly available that a company is a boycotter or discriminator," Paxton said in his letter.
Insurance, banking and asset management companies that have subscribed to net-zero greenhouse gas reduction initiatives will now have to provide additional verification to prove they are complying with the state's anti-boycott laws, according to the attorney general.
The Lone Star State two years ago passed a pair of laws that prohibited the government, including public retirement funds, from entering into contracts worth $100,000 or more with companies or affiliates that boycott energy companies and those that have discriminated against the gun industry. Those statutes built on a 2017 measure that banned dealing with companies that boycotted Israel. The prohibitions cover a spectrum of financial services, as well as legal and architecture firms.
The laws were part of a backlash by conservative political leaders intended to punish financial institutions and other companies that adopted economic, social and governance, or ESG, policies. Texas has additionally banned insurers from considering such standards when setting rates, and Paxton has helped lead a multistate lawsuit against a Biden administration's rule allowing retirement planners to consider social and environmental concerns when making investment decisions.
The Fifth Circuit earlier this year upheld the dismissal of a lawsuit brought by a Texas pensioner challenging the constitutionality of the state's Israel boycott law. An appeals court panel held that the former government worker didn't prove he was injured by the law.
Under Texas laws, companies have to verify they meet the standards and can be designated as violators by the state's comptroller. About two dozen companies are currently considered either energy company or Israel boycotters, including giants such as Blackrock Inc., UBS Group, Unilever PLC and its subsidiary ice-cream maker Ben & Jerry's Homemade Inc., according to Paxton's letter. Earlier this year, the attorney general's office prohibited Citigroup Inc. from underwriting Texas municipal bonds after determining the company discriminated against the firearms industry.
But the state's list is not exhaustive, and Paxton directed governmental entities to look out for red flags and do their own due diligence to make sure they are not contracting with companies running afoul of Texas bans.
In particular, members of net-zero groups for banks, insurers, asset managers and asset owners are coming under increased scrutiny from his office, and officials should take extra care when contracting, renewing or amending a business agreement with those parties, Paxton added.
"As attorney general, my job is to uphold state law and ensure that Texas remains a friendly state for companies to do business — including those that produce the energy we depend on and the firearms that secure our safety and freedom," Paxton said.
In a statement, Blackrock noted a section on its website labeled "we do not boycott the energy industry" and said it invested more than $128 billion in public energy companies based in Texas.
"Blackrock offers our clients the choice to help them achieve their investment objectives," the company said. "Boycott lists raise costs for Texas taxpayers and reduce returns for firefighters, teachers and state employees seeking to retire with dignity."
A representative for Citibank declined to comment Wednesday. Paxton's office and representatives from UBS and Unilever did not immediately respond to requests for comment.
--Additional reporting by Hailey Konnath, Abraham Gross and Kellie Mejdrich. Editing by Scott Russell.
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