KBRA Releases ESG Research: Texas Senate Bill 19-A Clash of Stakeholder Interests Business WireKBRA Releases ESG Research: Texas Senate Bill 19-A Clash of Stakeholder Interests Business WireKBRA Releases ESG Research: Texas Senate Bill 19-A Clash of Stakeholder Interests Business Wire
Impact Investing Forum 2023
London. May 04-05, 2023.
NEW YORK—-(BUSINESS WIRE)-Kroll Bond Rating Agency released ESG research on a Texas law that requires firms doing business with state entities (including counties, municipalities and school districts) to certify that they are not discriminating against the ammunition or firearm industries. The law was in effect since September 1, 2021.
Senate Bill 19 (SB 19) was passed in mid April and signed into law by Republican Governor Greg Abbot in June. It follows Texas SB 13 which prohibits state investments in companies that restrict oil and gas industry business activities. Three of the state’s top municipal bond-underwriters, J.P. Morgan Chase and Citigroup, reacted to SB 19. They were unable or unwilling to certify compliance with the law, leading to them being pulled from the market for new state business. Texas was the second-largest municipal debt market, after California, with over $58 billion in bond issuance for 2020. J.P. Morgan and Citigroup are the top five underwriters of Texas, with $6.4 billion in issuance in the first half 2021.
The Key Takeaways
Texas SB 19 is a great example of the complexity of competing stakeholder preferences.
Debt issuers are increasingly concerned about stakeholder preferences and reputational risk in relation to ESG issues. KBRA’s analysis of ESG credit issues has included stakeholder preferences.
KBRA’s ESG analysis is objective and focuses on the transaction’s default risk. KBRA does away with value-based judgments about stakeholder ESG preferences. Instead, it focuses on credit risk and the relevance of these preferences.
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