Two more banks under Texas review quit climate group

Bank of America (BAC) and Morgan Stanley (MS), which have been under review by the Texas attorney general over their participation in the Net-Zero Banking Alliance, withdrew from the organization this week.

Their departure from the group follows that of Wells Fargo (WFC), which was cleared by Texas on Dec. 20 to continue to do business with the state and its local governments, including underwriting their municipal bonds.

In October 2023, Texas Attorney General Ken Paxton put the three banks, as well as Barclays (JJCTF), JP Morgan, RBC Capital Markets, and other financial firms, under review over their involvement with the Net-Zero alliance, which seeks a transition to net-zero greenhouse gas emissions by 2050.

The move was in conjunction with a 2021 Texas law prohibiting state and local government contracts worth $100,000 or more with entities that "boycott" the fossil fuel industry.

There was no immediate response from the attorney general's office about the status of BofA and Morgan Stanley (MS) in the wake of their departure from the climate group.

Morgan Stanley (MS) said while it decided to withdraw from the alliance, its "commitment to net-zero remains unchanged."

"We aim to contribute to real-economy decarbonization by providing our clients with the advice and capital required to transform business models and reduce carbon intensity," a statement from the bank said. "We will continue to report on our progress as we work towards our 2030 interim financed emissions targets."

A statement from BofA said: "We will continue to work with clients on this issue and meet their needs."

In January 2024 Paxton's office banned Barclays (JJCTF), saying the bank declined to respond to questions about its environmental, social, and governance commitments.

Like Wells Fargo (WFC), BofA and Morgan Stanley (MS) have participated in Texas bond deals while under review. BofA led a $1.568 billion Texas Water Development Board bond sale in September. Morgan Stanley (MS) was co-senior underwriter for a $696 million Texas Transportation Commission general obligation refunding bond issue last year.

The constitutionality of the 2021 law is being challenged by a business group, which filed a lawsuit in federal court against Paxton and Texas Comptroller Glenn Hegar in August, who have filed a motion to dismiss the case.