Texas has declared that BlackRock and nine listed European financial groups “boycott” the fossil fuel industry, a designation that could lead state pension funds with billions of dollars under management to divest shares held in the groups.

The announcement by Glenn Hegar, Texas comptroller, escalates the campaign against ESG investing in Republican-led U.S. states. Florida on Tuesday passed a resolution banning its pension fund managers from taking ESG considerations into account with their investing strategies.

The U.S.’s largest producer of oil and gas, Texas in 2021 passed a law that attacked ESG investing for potentially hurting the industry. The provisions require state pension and school funds to divest shares they hold in financial groups which, in the government’s view, “boycott energy companies.”

The law defines a boycott as “refusing to deal with, terminating business activities with, or otherwise taking any action that is intended to penalize, inflict economic harm on, or limit commercial relations with a company” in the fossil fuel industry that has not made certain environmental pledges.

Besides BlackRock, the Europe-based financial groups subject to divestment are BNP Paribas, Credit Suisse, Danske Bank, Jupiter Fund Management, Nordea Bank, Schroders, Svenska Handelsbanken, Swedbank and UBS. A list of 348 mutual funds were also marked for divestment.

The Teacher Retirement System of Texas says it is the 20th-largest public pension fund in the world, with $160 billion in assets under management. It holds roughly $28 million of BlackRock shares, or 0.3% of the company, according to Bloomberg.

“The ESG movement has produced an opaque and perverse system in which some financial companies no longer make decisions in the best interest of their shareholders or their clients,” Hegar said on Aug. 24.

State pension funds must notify the comptroller of their direct and indirect holdings, but Texas law provides some leeway over shares and mutual funds marked for divestment.

In a statement, BlackRock said it disagreed with the comptroller’s decision.

“This is not a fact-based judgment,” BlackRock said, adding that it has invested more than $100bn in Texas energy companies. “Elected and appointed public officials have a duty to act in the best interests of the people they serve.”

It added: “Politicizing state pension funds, restricting access to investments, and impacting the financial returns of retirees, is not consistent with that duty.”

Among its other investments, BlackRock-managed funds are the second-largest shareholder in Exxon Mobil, the oil supermajor that has its headquarters in Texas.

UBS said it gave the comptroller evidence that it does not boycott energy companies: “We firmly disagree with the comptroller’s decision to include UBS in this list.”

Credit Suisse said in a statement it “is not boycotting the energy sector as the bank has ongoing partnerships and strong client relationships in the energy sector”. The other financial groups were not immediately available for comment. Texas funds have negligible holdings in UBS and Credit Suisse.

The Investment Company Institute, the U.S. fund lobby group, also weighed in, saying the move “will only harm the ability of Texas police, firefighters, teachers, and other state civil servants to save for a secure financial future.”

The Aug. 24 announcement does not affect BlackRock or the other nine groups’ investment management contracts with state pension funds. In the future, these contracts must include a statement that the asset manager “does not boycott energy companies,” Texas said. So long as the contractor provides these verifications, “the statute does not prohibit a state agency from contracting” with one of the 10 financial groups, the state added.