Updated March 16, 2022 at 3:20 PM ET

Ivan Frishberg says his job is just smart financial policy. He's chief sustainability officer at New York-based Amalgamated Bank, which focuses on socially responsible investment. That includes steering investments away from things like fossil fuels that contribute to global warming.

"Banks and asset managers are in many ways modeling capitalism," he says, "moving money away from things that we know are inherently risky, and to where the market wants it."

About ten percent of all investments in the world are now in some kind of environmental or socially aligned fund. And big financial firms like BlackRock – under pressure from shareholders – have joined the trend, attracting investors and positive media coverage by touting environmentally responsible strategies.

But last year, when BlackRock CEO Larry Fink wrote a letter advising companies to prepare for a zero carbon world, there were some places where the reaction was not so positive.

Places like Texas.

A model bill from a group that opposes climate action

"To see companies taking that position, I really felt like this was an anti-Texas narrative," says Jason Isaac.

Isaac heads the Texas Public Policy Foundation, an influential think tank that opposes efforts to fight climate change and receives millions of dollars from fossil fuel interests.

A few years ago, Isaac says he started hearing complaints about banks betting on the energy transition. "When you can't get access to capital, it's harmful to these industries."

He says some people in oil and gas asked for his help.

Isaac is a former state representative, so he wrote a model bill and passed it to lawmakers, a fact the watchdog group Documented brought to the attention of NPR.

Essentially, the bill said the state of Texas cannot do business with financial groups that divest from fossil fuels. Issac says the goal is to get these banks and investment firms to change their policies. He calls it "a responsible way to push back that says, 'Look, if you're going to be anti-Texas, then you're not going to get to do business with Texas.'"

The bill was signed into law last year. Now the Texas comptroller's office is creating a list of companies that could face a state boycott.

On Wednesday, Comptroller Glenn Hegar sent a letter to 19 financial companies asking for a list of any mutual funds or exchange-traded funds in their portfolios that "prohibit or limit investment in fossil fuels." He said another round of letters will go out soon to 100 other companies, and any that fails to respond within 60 days "will be presumed to be boycotting energy companies."

One former state comptroller calls it a "bad precedent"

There are exemptions that allow the comptroller to consider the financial impact of divestment. But in the long run, the law could mean that Texas pulls billions in pension funds and school endowment money from some of the country's biggest investment firms – including Blackrock.

The whole thing has a lot of people very nervous.

"A very bad precedent," says Tom Sanzillo, the former New York State Comptroller.

Sanzillo now works for the Institute for Energy Economics and Financial Analysis. The group supports the transition away from fossil fuels. But Sanzillo says when he was in state government he would oppose any effort by lawmakers to intervene in matters of investment.

"Whether we liked it or didn't like it. We would oppose it," he says. "Because the legislature and the governors should have no say in the running of the fund."

In the case of Texas, Sanzillo also thinks the move could jeopardize state money. That's because, even though energy prices are high right now, he says oil and gas has provided a bad return on investment for years.

BlackRock backpedals on its climate stance

Still, the goal of pushing companies to a more fossil fuel friendly position – at least publicly – appears to be working.

BlackRock representatives have met with Texas state leaders trying to smooth things over, and highlighting their fossil fuel investments. CEO Fink also wrote a letter this year flatly stating that the firm does not pursue fossil fuel divestment.

"You can already see that they [BlackRock] have now written back to the state and said, 'Hey, hey, hey, don't worry, we love you guys,'" says Amalgamated Bank's Ivan Frishberg. "'We're open for business. Bring us your oil and gas!'"

BlackRock did not respond to a request for comment.

Meanwhile, similar bills to punish fossil fuel divestment and carbon-neutral goals have been introduced in other states, including West Virginia, Louisiana and Oklahoma.

The Texas Public Policy Foundation's Jason Isaac, who says he has also met with BlackRock representatives, hopes there is more to come. He imagines similar state laws that will target bank investment strategies on other industries, like forestry, agriculture or livestock management.

"I think we're just at the beginning of this trend," says Amalgamated Bank's Ivan Frishberg. "And we don't know where it's going to end up."

But Frishberg says one thing the Texas law and any others won't change is the reality of global warming. And the smart money, he says, will move to minimize the risk of it.

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