Don't mess with Texas. UBS has been blacklisted in Texas because of its commitment to sustainable investment. Now the bank is being asked to pay up because of Texas' ESG policy.
The ESG dispute in Texas has caught up with UBS, with the bank agreeing to pay $850,000 to settle allegations it harmed an independent school district in Texas after the bank was barred from underwriting a bond issue.
Under a law passed in 2021, financial firms seeking to enter into contracts with Texas government agencies must certify they're not boycotting energy companies. Lawmakers say the measure is an attempt to protect the heavily energy-dependent Texas economy from the impact of environmental, social, and corporate governance (ESG) investment standards.
Blacklisted
UBS initially confirmed it wasn't boycotting energy companies when it agreed to underwrite $18.6 million in bonds to be issued by the Normangee Independent School District. But in August 2022, the Texas comptroller put UBS and several other financial services companies on a list of energy boycotters.
The Attorney General's Public Finance Division concurred with that finding, so the issuance contract with Normangee ISD was rejected. This meant that the bonds had to be put up for auction again. All this was imposed on the Swiss bank - and yet it now has to pay.
Higher Costs
In a statement Friday, Texas Attorney General Ken Paxton said he negotiated the settlement on behalf of Normangee ISD because the district had to re-bid the bond contract at a higher interest rate. The settlement reflected the costs the district incurred to re-bid the sale without UBS, the attorney general explained.
Paxton further found the settlement demonstrates his agency's commitment to «I remain committed to combatting the corporate ESG investment agenda, shielding taxpayers from the extra costs that come with it by shifting the burden to banks and protecting Texas energy companies.»
