Texas clears Wells Fargo after bank quits Net-Zero alliance

Texas Attorney General Ken Paxton ended a 14-month review of Wells Fargo on Friday that could have led to a ban on underwriting governmental bonds in the state after the bank withdrew its membership in the Net-Zero Banking Alliance.

In October 2023, Paxton put several firms, including Bank of America, JP Morgan, Morgan Stanley, RBC Capital Markets, and Wells Fargo 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 that prohibits state and local government contracts worth $100,000 or more with entities that “boycott” the fossil fuel industry.

“Today, Wells Fargo took a step in the right direction by officially ending their affiliation with NZBA, and Texas welcomes them to continue doing business with our great state,” Paxton said in a statement. “I urge other financial institutions to follow their example and end ESG policies that are hostile to our critical oil and gas industries.”

In response to emailed questions, Wells Fargo only confirmed it ended its Net-Zero Alliance membership.

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

While on review, Wells Fargo was senior underwriter for some high-profile bond deals in the Lone Star State, including a $723.5 million Dallas Fort Worth International Airport revenue bond sale, which was selected as the Southwest region winner in The Bond Buyer’s 2024 Deal of the Year Awards.

The bank also headed a $1.63 billion Texas Transportation Commission Central Texas Turnpike System July bond sale and a $371 million revenue refunding bond issue in October for the Harris County-Houston Sports Authority.

Other banks have also underwritten bonds in the state while under the attorney general’s review.

Texas was an early enactor of anti-environmental, social, and governance laws, including another targeting firearm industry “discrimination,” that have led to the blacklisting of several financial firms, including municipal bond underwriters, for contract and divestment purposes.

Wells Fargo escaped an underwriting ban in August 2023 when the Texas Attorney General’s Office announced it was not able to determine if the bank had a policy or practice that discriminates against a firearm entity or firearm trade association.

A similar oil and gas industry boycott law in Oklahoma led to Wells Fargo’s resignation last year as lead underwriter for a $500 million Oklahoma Turnpike Authority deal. The move followed the bank’s placement on the state treasurer’s list of 13 financial firms determined to be “boycotters.”