Texas bans Barclays from muni market over ESG dispute

Texas Attorney General Ken Paxton barred Barclays from working on municipal bond deals after his office said the bank didn’t respond to requests for information about its carbon emission commitments.

“When asked for more information concerning its ESG commitments, Barclays elected not to respond to the questions and acknowledged that by doing so it would likely forfeit its ability to contract with Texas governmental entities,” Paxton’s office said in a statement Friday. 

Paxton’s office, which oversees municipal bond deals in the state, said it would no longer approve public securities underwritten by Barclays. The bank told the office this week that it was “unable to respond” to further questions, according to a letter to Texas bond attorneys released Friday by Leslie Brock, chief of the attorney general’s public finance division.

Andrew Smith, a spokesperson for Barclays, declined to comment.

Paxton has been probing whether certain banks, including Barclays, engage in boycotts of the fossil fuels industry and therefore can’t work on muni bond deals in Texas in light of a 2021 state law. He’s targeting companies that are members of groups seeking to reduce greenhouse gas emissions. No other bank has said they will not be able to respond to the office’s queries, Brock’s letter said. 

Barclays is a member of the Net-Zero Banking Alliance. Members have committed to financing climate action that will “transition the real economy to net-zero greenhouse gas emissions by 2050,” according to the alliance’s website. 

The London-based bank was the 11th biggest underwriter of municipal bonds in 2023 and the ninth largest manager in Texas over that time, according to data compiled by Bloomberg. The attorney general’s announcement is a blow to the bank’s public finance department given that Texas is a major source of new business. The state’s surging population and related infrastructure needs drove it to become the No. 1 market for new muni sales last year.