Testimony Before the Texas Senate State Affairs Committee in Support of SB 946
Jack McPherrin
Research Fellow, Heartland Impact
April 24, 2025
Chairman Hughes, Vice-Chair Paxton, and Members of the Committee,
Thank you for inviting me to speak on this bill. My name is Jack McPherrin, and I am a research fellow with Heartland Impact. Heartland Impact is the advocacy and outreach arm of The Heartland Institute. Both are independent, national, nonprofit organizations working to discover, develop, and promote free-market solutions to social and economic problems. Heartland specializes in providing state lawmakers the policy and advocacy resources to advance free-market policies towards broad-based economic prosperity.
As you are likely well aware of, environmental, social, and governance (ESG) scores are essentially a risk assessment mechanism increasingly being used by investment firms and financial institutions that forces companies, entire industries, and society at large to focus upon politically motivated, subjective goals. Pursuing these goals often directly contravenes the interests of companies, shareholders, and customers, while also degrading macroeconomic prosperity, free markets, democratic institutions, and individual liberty.
Companies are graded on mandated ESG commitments to promote, for example, climate or social justice objectives. Those that are arbitrarily assigned low ESG scores can be punished by divestment, reduced access to credit and capital, and/or an inability to access financial services such as checking and savings accounts and insurance coverage.
SB 946 prohibits lenders from discriminating against organizations based on social credit or value-based standards, such as ESG. The bill prevents lenders from denying organizations credit based on any reason “not based on the organization’s failure to meet quantitative, impartial standards established by the lender for assessing financial risk,” including social credit scores, subjective, value-based ESG scores, diversity, equity, and inclusion, and “contracts in, services given to, or association with a particular religious institution or legal industry, including agriculture, fossil fuels, firearms, or free-speech media platforms.”
ESG-driven financial discrimination against entire groups—whether industries, companies, or individuals—has been prolific. For example, in 2018, some large U.S. banks, including Citibank and Bank of America, implemented restrictions for gun manufacturers and retailers. According to a report by the New York Times, “They are restricting their credit card and banking services to gun retailers and halting lending to gun makers that do not comply with age limits and background check rules determined by the banks. They are also freezing out businesses that sell high-capacity magazines and ‘bump stocks,’ attachments that enable semiautomatic rifles to fire faster, even though such products are legal under federal law.”[1]
Deutsche Bank AG and Signature Bank announced in early 2021 that they would no longer provide services to President Donald Trump or his business, the Trump Organization.[2]
Also in 2021, Sustainalytics, an ESG business owned by Morningstar, published a report titled How Sustainable Finance is Shaping Change in Banking.[3] In the publication, Sustainalytics notes:
Most major banks screen their lending portfolios against specific ESG risks as per the OECD Due Diligence guidance, and many embrace negative or positive screening for potential corporate lending transactions or project finance transactions. Screening strategies filter potential transactions using predetermined ESG criteria to rule companies in or out of contention for financing. Negative screening and norm-based screening involve the exclusion or avoidance of transactions not aligned with environmental, social and ethical standards. Exclusion criteria often include issues like weapon manufacturing, tobacco sales or production of fossil fuels. While negative and norm-based screening are the most popular techniques used for ESG asset management, these practices have been losing traction since 2015.
Positive screening, on the other hand, selects corporate borrowers that score highly on ESG factors relative to their peers. This can include best-in-class screening, or the inclusion of investments in companies and sectors with higher ESG scores as compared to their peers or companies that are actively improving their ESG performance. This screening method does not necessarily exclude ESG laggards but rather focuses on those performing best with regards to ESG in relation to comparable companies or industries. In comparison to corporate lending transactions, the intensity of screening is often higher for project finance transactions given due diligence requirements under the Equator Principles.
Dozens of the world’s most powerful banks and insurance companies have, to varying degrees, weaponized ESG to screen out businesses and even some individuals who refuse to comply with those institutions’ social justice or environmental policies. Although there are many examples of financial institutions flexing their muscles as a tactic to create larger societal changes through ESG, perhaps the most economically important is that virtually every large bank in the United States has committed to forcing the businesses they work with to phase out their use of fossil fuels—even if it causes economic harm to customers and businesses.
Many of these financial institutions have pledged to make their entire business portfolios “net-zero emissions” by 2050, and to halve their emissions by 2030.[4] If fulfilled, these pledges would necessitate that banks eliminate all or nearly all lending and banking activities with customers who use fossil fuels, including individuals who drive gasoline-powered motor vehicles, significantly impacting virtually every family and industry in the United States.
Most major U.S. banks—including JP Morgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs, and Morgan Stanley, among others—have announced restrictions on financing for certain fossil fuel projects as well, such as coal mining and oil and natural gas projects. In addition, financial institutions such as JP Morgan Chase, Bank of America, Wells Fargo, and U.S. Bank and credit card processors such as PayPal have discriminated against faith-based organizations.[5]
Discrimination has been endemic amongst insurance companies as well. Many major insurance companies across the globe have implemented policies refusing to underwrite fossil fuel projects, including Allianz, AXA, Swiss RE, Munich RE, Zurich Insurance Group, The Hartford, Chubb, and AIG.[6]
For a recent example, in 2024, Zurich announced it would cease underwriting new oil and gas exploration and development projects, as well as metallurgical coal mining. Zurich also now requires its highest-emitting corporate clients to adopt credible climate transition plans aligned with a 1.5°C pathway and the goal of net-zero emissions by 2050. The company has stated it will review these clients’ progress and may terminate relationships that fail to show sufficient transition momentum.[7]
Chubb updated its policies in 2024 as well. Chubb announced that it would continue to provide coverage for oil and gas producers with annual revenues greater than $1 billion that are demonstrating progress towards achieving near-zero methane emissions—0.2 percent—but that it may “decline coverage if a potential policyholder cannot meet our methane performance expectations.”[8] In August 2024, Chubb withdrew its insurance coverage for the Rio Grande liquefied natural gas project in Brownville, Texas—one of the largest proposed fossil fuel infrastructure investments in the state.[9]
Ultimately, ESG-driven financial discrimination—whether carried out by investment firms or insurance conglomerates—imposes political orthodoxy at the expense of sound risk assessment, consumer choice, and economic vitality. The common-sense provisions in this bill would go far in protecting the Texas economy and Texas companies from discrimination and denial of basic financial services. It would also ensure that radical activists, many from outside of this state and outside of this country, will not control the means of production and curtail the freedoms of each and every citizen of this state.
Thank you for your time.
Heartland Impact can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Cameron Sholty, at csholty@heartlandimpact.org or 312/377-4000.
[1] Alan Rappeport, “Banks Tried to Curb Gun Sales. Now Republicans Are Trying to Stop Them,” New York Times, May 25, 2018, https://www.nytimes.com/2018/05/25/us/politics/banks-gun-sales-republicans.html
[2] Shahien Nasiripour, “Professional Bank joins lenders refusing to do business with the Trump Organization,” Fortune, January 12, 2021, https://fortune.com/2021/01/12/professional-bank-lending-services-business-trump-organization/
[3] [3] How Sustainable Finance is Shaping Change in Banking, Sustainalytics, 2021, https://connect.sustainalytics.com/scs-ebook-how-sustainable-finance-shaping-banking
[4] Eamon Barrett, “Wells Fargo is the last of the Big Six banks to issue a net-zero climate pledge. Now comes the hard part,” Forbes, March 9, 2021, https://fortune.com/2021/03/09/wells-fargo-climate-carbon-neutral-net-zero/
[5] ViewpointDiversityScore.org, “Instances of Viewpoint-Based De-Banking,” accessed April 23, 2025, https://www.viewpointdiversityscore.org/resources/instances-of-viewpoint-based-de-banking
[6] Insure Our Future, “Fifty Years of Climate Failure: 2023 Scorecard on Insurance, Fossil Fuels, and the Climate Emergency,” November 2023, https://global.insure-our-future.com/wp-content/uploads/2023/11/IOF-2023-Scorecard.pdf
[7] Kenneth Araullo, “Zurich Insurance stops underwriting new fossil fuel projects,” InsuranceBusinessMag.com, April 8, 2024, https://www.insurancebusinessmag.com/us/news/environmental/zurich-insurance-stops-underwriting-new-fossil-fuel-projects-484241.aspx
[8] Chubb, “Chubb’s Corporate Climate Underwriting Criteria Summary,” Updated March 2025, https://about.chubb.com/content/dam/chubb-sites/chubb/about-chubb/citizenship/environment/pdf/chubb-corporate-climate-underwriting-criteria-for-high-emitting-industries.pdf
[9] Tyler Kruse, “Chubb Drops Rio Grande LNG Insurance,” Insure Our Future, August 6, 2024, https://us.insure-our-future.com/chubb-drops-rio-grande-lng-insurance
