Banning investment managers who avoid fossil fuels is a bad idea


Texas, like a number of resource-rich, poorly regulated, free-market western states, is home to people willing to fight in the marketplace, but obeying a code of living and letting live that lets them live ready. to listen to anyone who expresses himself with the courage of his convictions. This attitude has helped turn states like Texas into economic powerhouses in an increasingly global economy.

You wouldn’t expect Texans to threaten people with economic ruin for having beliefs that some think are “wrong.” But Texas has just joined a growing group of states doing just that. And this disturbing trend is using first responders, firefighters, paramedics, teachers and state officials as unwitting bargaining chips in a political game.

The bill in question is SB 13, and the legislature’s weapon of choice is state pension money. Like similar legislation that has been proposed or enacted in a series of oil-rich states, the bill targets private investment management firms that focus on sustainable investing, a practice that has aroused the ire of the government. oil and gas lobby.

State pension plans often contract with these private investment management companies to provide retirement benefits to state and local employees. And SB 13 will prevent state pensions from having relationships with companies that refuse to invest in fossil fuels.

Putting politics before the interests of retirees

This recent politicization of the state’s pension investment strategy is a serious mistake. At a time when public pensions across the country are underfunded – Texas itself has a $ 14.7 billion deficit – investment decisions for those who protect and serve must be guided by consideration, and only one: to maximize returns.

Banning investment managers boycotting oil forces retirement planners to put politics ahead of smart investing and could unlock huge investment opportunities. Of course, Big Oil is a big business today. But sometimes green investing is the smartest.

After all, some of the fastest growing, fastest growing and most profitable companies in the world like Tesla exist to compete with fossil fuels, which means that sustainability-focused portfolios often outperform traditional portfolios. And everyone knows that the current river of oil will not last forever. Forcing pension managers to prioritize fossil fuels is a short-term, if not speculative, game at best.

States must do better to deliver on the promises they have made to their millions of retired public servants and their families in return for their lives of service, all of whom depend on smart decision makers to protect their futures.

A violation of freedom of expression

But the state-sponsored boycotts of private companies because of the boycotts of those companies are more than bad public policy and mismanagement. They are also a violation of the core values ​​of the First Amendment. Everyone has the right to speak up and act according to their conscience without being silenced and punished by the government.

And punishing people for engaging in a boycott violates the First Amendment protection for free speech, because a boycott is more than a refusal to buy things. It’s a refusal to buy things for a reason. This reason is exactly what these bans do.

Oil-rich states want to punish investment firms that refuse to invest in fossil fuels, and thus silence their position on one of the most serious political, economic and social issues of the day. Courts routinely crack down on such efforts to silence political dissent, as they did with the Texas Legislature’s latest attempt to arm state power against private business boycotts: the ban “Anti-BDS” adopted in the last legislative session, which prevents the state from dealing with companies that refuse to invest in Israel.

The ban on investment firms that boycott oil could – and should – suffer the same fate. And the eventual futility of these bans only makes matters worse, revealing that they are little more than an empty political gesture to a powerful lobby – a move that will lead to a glut of costly litigation without real consequence. . What is more, these boycotts of boycotters offer protectionism to an industry that does not need protection. Oil and gas thrive in the United States

Over the past decade, the United States has become a net exporter of energy, largely thanks to oil and gas booms in states like Texas. The industry is doing well on its own. It doesn’t need protectionist legislation to back it up.

As a result, legislation like SB 13 has states stepping in where they don’t belong, tilting the market in unnecessary and unproductive ways, and sticking it to the market for ideas that the First Amendment exists to protect. For all these reasons, it must be rejected.

This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.

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J. Carl Cecere is the owner of Cecere PC, a law firm specializing in Supreme Court and appeals practice.

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