Seated at a long podium, Greg Abbott looks over at Dan Patrick as he speaks into a microphone. Behind them is the seal of the state of Texas.
AP Photo/Eric Gay

Right-Wing Protectionism is Costing Texas

Laws banning the state from doing business with banks that are dubbed anti-fossil fuel or anti-gun will likely cost hundreds of millions in higher interest rates.


Justin Miller has brown hair, a light beard and mustache and is wearing a corduroy button down over a dark t-shirt.

A version of this story ran in the November / December 2022 issue.

Republicans’ moralizing, “anti-woke” crusade has entered the arena of fiscal governance, and it’s likely to cost taxpayers, pensioners, municipalities, and everyday Texans a big chunk of change.

Last fall, new state laws went into effect that prohibit governmental entities from engaging with financial institutions that the state deems to be anti-fossil fuel, anti-gun, and, thus, anti-Texas. 

These laws, passed overwhelmingly by the Republican-controlled Legislature, are the latest and most expansive in a suite of legislation that makes the state the ultimate arbiter of all that is good and bad. In effect, the power of the purse is weaponized to protect the interests of the conservative cause and punish its enemies. Namely, what the right has cast as the Woke of Wall Street—the big banks and investment firms like Citigroup and BlackRock that ostensibly engage in socially conscious investing, which includes pledges and specialized investment funds that may exclude gun manufacturers or oil companies. 

For a party that once claimed the mantle of free markets in Texas, Republicans—led by Governor Greg Abbott, Lieutenant Governor Dan Patrick, Attorney General Ken Paxton, and Comptroller Glenn Hegar—are embracing a new form of social, cultural, and economic protectionism. 

One recent study found that the state’s law banning firms that boycott oil and gas investments could cost local government entities—and ultimately taxpayers—as much as $530 million in higher interest costs.

Its first foray came when lawmakers passed a law back in 2017 that forbade the government from contracting with any people or companies that engaged in the “Boycott, Divestment, Sanctions” movement that targets Israel for its treatment of Palestinians. Republicans had to dramatically rework that law in the following session when it became clear that it was unconstitutional and practically unworkable. The biggest result was that Airbnb was put on a state blacklist that forbade major state purchases and investments in the property rental giant.

One recent study by a public finance professor at the University of Pennsylvania and a fiscal analyst at the Federal Reserve estimates that the state’s law banning firms that boycott oil and gas investments—often through what are known as environmental, social, and governance (better known as ESG) funds—have forced out the biggest issuers of local bonds in Texas. That, the researchers found, could cost local government entities—and ultimately taxpayers—as much as $530 million in higher interest costs on debt used to finance new school construction, roads, and other infrastructure. 

Some of the biggest bond players in Texas—JPMorgan Chase, Citigroup, Bank of America, and Goldman Sachs—have either pulled out of the state or lost significant market share because of the new laws. 

In September, the small town of Anna in Collin County declined to give a $100 million bond deal to Citigroup, despite it having offered the best terms, because the state is still determining whether the Wall Street giant has run afoul of its new law forbidding banks from discriminating against the gun industry. After consulting with the Texas Attorney General’s Office and its own legal advisors, the city opted to go with the second-best bid for the bonds instead. The city said that this deal, with Robert W. Baird & Co., would cost about $275,000 more over 25 years, according to the Dallas Morning News


Bond houses have taken to marketing themselves as certifiably compliant with Texas’ protectionist laws. In its proposal to handle what is likely to be the biggest bond deal in state history—$3.4 billion to securitize the long-term debt incurred by the energy industry in the deadly winter storm of 2021—Jefferies Financial Group touted its compliance with these laws. “We were not forced to resign from any transactions in the State nor were we identified in the press or mentioned in the State Legislative Hearings,” the firm’s pitch stated, according to Bloomberg. Since the laws went into effect in September 2021, Jefferies has surged from the sixth- to second-largest bond issuer in Texas. 

Despite other banks offering more competitive terms, Jefferies ultimately won the deal to finance the long-term financial fallout from the storm and will earn about $13 million in fees for doing so. That likely means that the cost of this bailout—which average ratepayers will be paying off for decades to come—is higher than it needed to be.

The small town of Anna declined to give a $100 million bond deal to Citigroup, because the state is still determining whether the Wall Street giant has run afoul of its new law forbidding banks from discriminating against the gun industry.

It’s not just local government bonds and utility ratepayers. Retired teachers, public-sector workers, local firefighters, police, and other emergency responders who all depend on their government pensions to survive could also feel the pain from these laws. Public pensions—ranging from the multi-billion-dollar Teachers Retirement System, one of the largest in the country, to small municipal retirement funds—all have to abide by these laws, which require pension managers to scour their investment portfolios and divest from any problematic funds, no matter how profitable they are. 

In late August, Comptroller Hegar revealed the state’s new anti-oil and gas blacklist, featuring 10 banks and nearly 350 investment funds that were alleged to be fossil-fuel haters. “A vibrant Texas oil and gas industry is a stabilizing force in today’s economic and geopolitical environment,” Hegar said in a statement. “My greatest concern is the false narrative that has been created by the environmental crusaders in Washington, D.C., and Wall Street that our economy can completely transition away from fossil fuels, when, in fact, they will be part of our everyday life into the foreseeable future.”

Despite insisting that it did not discriminate against the fossil fuel industry, BlackRock, the world’s largest financial manager, was included on that list. 

What’s good enough for Texas must be good enough for its most powerful politicians, right? Well, apparently not for Lieutenant Governor Patrick, who led the push in 2021 to pass these laws. In a letter, he personally demanded that Hegar blacklist BlackRock, which he called the “worst offender” for “capriciously discriminating against the oil and gas industry.”

“Texas will not do business with those that boycott fossil fuels,” he proclaimed. As the Texas Monthly discovered in September, Patrick had substantial personal investments in BlackRock, including mutual funds that were on the Texas comptroller’s forbidden list.