(Bloomberg) -- Texas bars its public pensions from investing in 350 funds run by asset-management giants such as BlackRock Inc. and Invesco Ltd. because a key Republican state official says they “boycott” the oil and gas industries.

But a Bloomberg News analysis found that the 72 BlackRock funds on the prohibited list have invested more than $2 billion in the oil industry, while an Invesco fund allocates about 20% to oil and natural gas companies, some of which are also Texas-based. The TIAA-CREF Social Choice International Equity Fund has a nearly 5% allocation to fossil fuels.

Altogether, almost half the funds on the boycotters list have invested a combined $5 billion directly in the oil and gas industry. And two thirds of the now banned funds have more than $13 billion invested in Texas-based companies, including Tesla Inc. and Waste Management Inc. 

The findings demonstrate how vague rhetoric used by Republicans attacking what they call “woke” capitalism has found its way into statutes that have proven difficult to interpret and seemingly contradictory to the state’s self-proclaimed reputation as business friendly. 

“Texan politicians are responding more to the hype about these asset managers rather than to the way they actually invest,” said Jill Fisch, a professor of business law at the University of Pennsylvania. “The big asset managers have been described as ‘woke’ or spurning certain industries. In reality, it’s not really true.”

In November, Comptroller Glenn Hegar, the state’s chief financial officer, published a list of entities that he determined engage in a “boycott” of fossil fuels under Republican legislation passed in 2021. The legislation prohibits investments in companies considered to be unfriendly to the oil and gas industry, which accounted for 8% of the state’s GDP in 2021. 

The law is part of a salvo of legislation launched across the country by Republicans against environmental, social and governance investing, which they’ve made into a culture war target. Texas has a similar law aimed at punishing Wall Street firms for restricting their work with the firearms industry.

The Bloomberg analysis of the list of prohibited investments highlights the confusion that continues to exist around the law two years after it was passed and the phrase “boycott” of the energy industry — language that’s been criticized as vague. Firms like BlackRock have emphasized that they do invest heavily in fossil fuels on behalf of clients.

The law says a boycott could include a company refusing to deal with, terminating business activities with, or taking any action intended to “penalize, inflict economic harm on, or limit commercial relations” with a company because it engages in the exploration, production, utilization, transportation, sale or manufacturing of fossil fuel-based energy. 

Chris Bryan, a spokesperson for the Texas comptroller’s office, said in an email that a fund “simply investing in oil and gas does not exempt an entity from this law.”

“A fund or financial firm may invest in fossil fuels but still boycott the industry under the statutory definition of ‘boycott,’ which we follow in administering this law,” Bryan said. “Furthermore, our listing decisions are based in large part on the responses given to us by the firms themselves.”

Brent Bennett, policy director at the Texas Public Policy Foundation, a conservative think tank which advocated for the legislation, said that funds could still invest in the oil industry and still be considered boycotters because they may be putting conditions on those investments. “Setting conditions on investment, we consider that sanctioning,” he said.

Spokespeople for Invesco and Nuveen, the investment manager of TIAA, declined to comment. 

“Texas is an incredibly important market for BlackRock and our clients,” said Mark McCombe, vice chairman at BlackRock. “We are helping millions of Texans invest and save for retirement. On behalf of our clients, we’ve invested more than $300 billion in Texas-based companies, infrastructure and municipalities, including $125 billion invested in the energy sector.”

While state pension funds like the Employees Retirement System of Texas, Teacher Retirement System of Texas and the Texas Municipal Retirement System must divest from funds or companies on the comptroller’s list, the law provides for exceptions if a state pension, for example, found that divestment would be inconsistent with their fiduciary duties.

And the pension funds don’t appear to have directly invested heavily in the barred entities to begin with. 

The Teacher Retirement System of Texas does own some of the funds but indirectly — meaning through an external investment manager — so it’s not required to divest, according to a letter sent to Hegar. Still, the pension said in late November that it would divest its direct holdings of Credit Agricole SA, Societe Generale SA and AMP Ltd. after they were labeled as boycotters. The Texas Municipal Retirement System wrote in a letter to Hegar in November that it didn’t directly own any of the companies or investment funds on the banned list.

“Policies that block responsible investing hurt the economy, and now we see they can’t be executed,” said Kyle Herrig, spokesperson for Unlocking America’s Future, a left-leaning political group that’s critical of anti-ESG legislation. “Texas wanted to pave the way for other states to attack ESG, but they’ve just shown the nation their plan is a failure and, in the process, damaged their reputation as a state that’s good for business.”

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