Texas Bans Barclays From Local Municipal Bond Market Over ESG Commitments

Texas legal representatives blocked Barclays from working on local municipal bond deals after the bank didn’t respond to requests about its carbon emission commitments.

Texas Bans Barclays From Local Municipal Bond Market Over ESG Commitments

According to Bloomberg report, Texas Attorney General Ken Paxton prohibited Barclays Plc from proceeding with its work on municipal bond deals and would no longer approve public securities underwritten by Barclays.

The Attorney’s office stated that the bank didn’t respond to requests for detailed information about its carbon emission and ESG commitments.

Municipal bonds are debt securities issued by local, county, and state governments. They are used to pay for capital expenditures, e.g. construction of highways, bridges, or schools. Municipal bonds act like loans, with bondholders becoming creditors. A major benefit of municipal bonds, or “munis,” is that the interest they pay is generally exempt from federal income taxes as well as from state income taxes in certain cases.

Paxton’s office, which controls municipal bond deals in the state of Texas, has been particularly interested in the engagement of certain banks, including Barclays, in boycotts of the fossil fuels industry. If the institution is engaged in such activities, it can’t work on muni-bond deals in Texas according to a 2021 state law.

Texas in 2021 passed its comprehensive legislation challenging the boycott of fossil fuels by global financial companies. It prohibits most state entities from contracting with companies that have reduced or cut investments in the oil and gas industry.

In 2022, Texas banned 10 financial firms from doing business with the state due to the fossil fuels boycott. These companies included BlackRock Inc., BNP Paribas SA, Credit Suisse Group AG, UBS Group AG, and Danske Bank, as well as some investment funds within large banks such as Goldman Sachs and JP Morgan.

The office is specifically targeting companies that are members of groups seeking to reduce greenhouse gas emissions. Barclays is a member of the UN-supported Net-Zero Banking Alliance, which includes 130 financial institutions. The group members are committed to financing climate action that will “transition the real economy to net-zero greenhouse gas emissions by 2050.”

In 2023, Barclays intensified its investments in sustainability-related projects. The bank planned to increase its funding of innovative climate tech startups from £175m by 2025, to £500m by 2027, seeing growth opportunities in the sector.

At the same time, according to the Attorney’s office, no other bank, except Barclays, has said they would not be able to respond to the queries about their ESG commitments and engagement in boycotts of the fossil fuels industry.

Bloomberg data also shows that Barclays was the 11th biggest underwriter of municipal bonds in 2023 and the ninth-largest manager in Texas over the last year.

Municipal bond issuance in Texas totaled $59 billion in 2023, making the state a leader in bond volume for the first time in 42 years. The state’s surging population and related infrastructure needs were the main reasons behind the robust growth in new muni sales last year.

Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.