Texas has moved to ban state entities from doing business with HSBC after the financial services giant introduced a new policy to transition away from financing fossil fuels.

The US state has added HSBC to a list of banned companies and investment funds, meaning state bodies such as pension funds cannot invest with or otherwise work with the group.

Texas comptroller Glenn Hegar claimed HSBC’s policy was pushing “a social agenda and… political goals over the economic health of their clients”.

HSBC is not providing any new financing to oil and gas assets, and is seeking to engage with clients to obtain data on plans to transition away from fossil fuels.

Hegar added that “recent events in the global financial sector provide a stark warning about what can happen when firms lose sight of their fiduciary responsibilities”, an apparent nod towards the recent collapse of two major US banks – neither of which was related to any ESG policy.

The comptroller echoed the arguments of many other officials in US states that have banned or restricted business with companies prioritising ESG.

“HSBC’s policies threaten Texas jobs, our state economy and our national security, and the tax dollars of hard-working Texans should not be leveraged to force policies that undermine Texas’ fiscal health and stability,” Hegar claimed.

However, the ban could have negative consequences for the pension funds forced to follow it. The Texas County & District Retirement System's executive director Amy Bishop told state senators that the ban would cost the fund an estimated $6bn over the next decade, reported ESG Today. This would have a direct knock-on effect on employers in the form of higher costs, Bishop added.

Texas’ list of banned entities includes 11 financial services companies and almost 350 investment funds. State entities have 30 days to notify officials of any affected holdings when a new name is added to the list, and must divest or cease working with the company by the following January.

The ban comes despite growing evidence of substantial financial costs from divestment and restrictions. Earlier this month, the Kansas Public Employees Retirement System revealed that complying with its state’s divestment rules would cost more than $1bn.