Citigroup was dropped from plans to underwrite Texas’ largest ever municipal bond—a $3.4 billion plan to raise investment in the state’s natural gas industry—over its oppositional stance to the firearms industry.
Citigroup was initially included among the list of firms that could underwrite the $3.4 billion bond. On Thursday, the board of the Texas Natural Gas Securitization Finance Corp. met to “reconstitute” the underwriting structure for the bond, Bloomberg reported. Citigroup no longer appeared among the list of bond underwriters after that meeting.
The Texas legislature passed a law in 2021, Texas Senate Bill 19, prohibiting public contracts with public companies deemed to be discriminating against the firearms industry.
On Jan. 18, Texas Attorney General Ken Paxton’s office announced it had designated Citigroup as an entity that discriminates against the firearms industry.
“It has been determined that Citigroup has a policy that discriminates against a firearm entity or firearm trade association,” wrote Leslie Brock, the Assistant Attorney General Chief for the Texas Attorney General’s public finance division reported Reuters.
“Citi’s designation as an SB-19 discriminator has the effect of halting its ability to underwrite most municipal bond offerings in Texas,” Paxton’s office said.
In March of 2018, Citigroup implemented a policy that requires retail sector clients and partners to refrain from selling firearms to individuals who haven’t passed a background check. Citigroup client firearms sales to individuals under 21 years old are also “restricted.” The company policy also prohibits retail clients from selling bump stocks and “high-capacity magazines.”
The investment bank contends that its policies do not discriminate against the firearms industry.
“We’re disappointed with the decision and will remain engaged with the Texas AG office to review our options,” a Citigroup spokesperson told NTD News. “Citi has been financing public works in Texas for more than 150 years and we currently have more than 8,500 employees who call Texas home. As we’ve said previously, Citi does not discriminate against the firearms sector and believe we are in compliance with Texas law.”
Citigroup declined to provide further comment when asked to specify what constitutes a “high-capacity magazine.”
NTD News reached out the Texas Attorney General’s office but did not receive a response before this article was published.
Municipal Bonds
The $3.4 billion municipal bond appears to be the first major deal Citigroup will miss out on after being labeled a “discriminator” against the firearms industry.
Municipal bonds are debt instruments that cities, counties, and states use to raise money for public works. A state or local government authority will issue these bonds, which investors buy because they earn interest. The municipal bonds can be attractive for banks and other financial institutions to underwrite because they earn management and underwriting fees for acting as the middleman between municipalities and bond buyers. Underwriters also earn money through commissions for selling the bonds.
Texas Blocking Other Investors
In addition to blocking state and local entities from doing business with firms that discriminate against the firearms industry, Texas also passed Bill SB 13 in 2021 that prohibits state and local government entities from doing business with firms that boycott the fossil fuel industry.
The law defines boycotting companies as those that “without an ordinary business purpose” decided to terminate contracts or refuse to do business altogether with fossil fuel industry members, or who take “any action that is intended to penalize, inflict economic harm on, or limit commercial relations” with a company that’s involved in the fossil fuel industry.
On Aug. 24, Texas Comptroller Glenn Hegar published a list of 10 financial firms and 350 funds that the state government deemed had boycotted the fossil fuel industry.
“This research uncovered a systemic lack of transparency that should concern every American, regardless of political persuasion, especially the use of doublespeak by some financial institutions as they engage in anti-oil and gas rhetoric publicly, yet present a much different story behind closed doors,” Hegar said. “This list represents our initial effort to shine a light on entities that are engaging in these practices and create some clarity for Texans whose tax dollars may be working to directly undermine our state’s economic health.”
The finance industry is facing increased pressure from conservatives over their embrace of environmental, social, and governance (ESG) investment practices.
Reuters contributed to this article.