West Virginia on Thursday morning announced that five major financial institutions, including Goldman Sachs and JPMorgan, will be banned from doing business with the state because they have stopped supporting the coal industry.
The announcement, made by West Virginia Treasurer Riley Moore, is the first time a state has moved to cut off banking relationships with major Wall Street firms over opposition to their efforts to reduce dangerous planet-warming emissions. .
This year, West Virginia passed a law championed by Mr. Moore that gave him the authority to bar financial institutions from doing business with the state if they were found to be “boycotting” fossil fuels.
Last month, Mr Moore sent letters to six financial firms warning them they could be barred from state business and gave them 45 days to respond. In addition to Goldman Sachs and JPMorgan, Mr. Moore wrote to three other banks – Morgan Stanley, Wells Fargo and US Bancorp – as well as the world’s largest asset manager, BlackRock.
Of the six firms, all but US Bancorp were barred from doing business with West Virginia on Thursday. The move comes just hours after Sen. Joe Manchin of West Virginia, who for months has blocked President Biden’s efforts to pass major climate legislation, announced a surprise deal that would radically expand federal support for renewable energy.
Goldman Sachs, JPMorgan, Morgan Stanley and Wells Fargo have all publicly said they are significantly reducing funding for new coal projects, while BlackRock has reduced its actively managed holdings in coal companies from 2020.
Such moves are increasingly common on Wall Street as major financial firms move to reduce their financial exposure to industries such as coal, which is a major contributor to planet-warming emissions and has become less profitable in recent years. The last.
Many large companies, including those that Mr. Moore has banned them from state business, have also pledged to drastically reduce their emissions in the coming decades and play an active role in supporting a transition to an economy that is less dependent on fossil fuels. .
Mr. Moore said US Bancorp had avoided inclusion on the state’s list of so-called restricted financial institutions because it had decided to eliminate anti-coal financing policies from its environmental and social risk policy.
Coal is the most polluting fossil fuel. US coal production has been in decline for more than a decade, largely thanks to the expansion of lower-cost natural gas.
Some of the targeted financial institutions currently have banking relationships with the state, including JPMorgan, which works with the West Virginia public university system and is one of 25 designated depositories for the state, holding about $46 million, according to Mr. Moore.
Mr. Moore said those contracts will close by the end of the year and that the state will begin looking for new service providers that do not have policies aimed at the coal industry. The law does not affect the holdings of the West Virginia Retirement System.
JPMorgan said, “This decision is short-sighted and disconnected from the facts,” adding that “its business practices are not inconsistent with this anti-free market law.”
BlackRock said it “does not boycott energy companies” and “does not pursue investment by sectors and industries as a matter of policy”.
Morgan Stanley said it was “disappointed” by the decision and that it “does not boycott fossil fuel energy companies”.
Wells Fargo said in a statement that it “evaluates its relationship with the state of West Virginia and our customers there, and we disagree with this decision.”
Goldman Sachs did not immediately respond to requests for comment.
In an interview, Mr. Moore described his implementation of the new law as an effort to remedy what he described as an inherent conflict of interest for his state, the nation’s second-largest coal producer after Wyoming.
“We are handing over money to a financial institution that is generated by the fossil fuel industry,” he said. “At the same time, they are trying to reduce those funds. There is a clear conflict of interest there.”
In 2020, BlackRock took aim at the coal industry in its annual letter to clients, announcing that the firm’s managed funds would begin to divest from coal companies.
“Thermal coal is very carbon intensive, becoming less and less economically viable and highly exposed to regulation due to its environmental impacts,” wrote the company’s executive committee, which is led by Chief Executive Larry Fink. “With the acceleration of the global energy transition, we do not believe that the long-term economic or investment rationale justifies continued investment in this sector.”
Goldman Sachs is among the banks that have said they will stop financing most new coal projects.
“Coal-fired power generation is one of the largest sources of air pollutants, including greenhouse gas emissions, and has other significant environmental, health and safety impacts on local communities,” a statement on the website said. the bank’s website. “However, coal-fired power is still an important source of electricity generation and a contributor to reliable and diverse energy supply, particularly in developing economies.”
The five companies targeted by Mr. Moore supports environmental, social and governance principles, or ESG, a catch-all term that has become a lightning rod for criticism from conservatives.
This year, Mr. Moore pulled about $20 million of the state’s operating funds from BlackRock because he said the firm was too focused on ESG priorities.
Opposition to ESG is growing in Republican circles. Former Vice President Mike Pence, a potential Republican presidential contender in 2024, recently said he wanted to “put the brakes on” ESG
House and Senate Republicans have recently spoken out against the growing push to more deeply integrate climate risk into the financial system.
And more states are poised to take action against financial institutions that are pulling away from fossil fuels.
Republican lawmakers in a dozen other states have advanced bills similar to the one implemented in West Virginia, and governors in four states, including Texas and Oklahoma, have signed such laws.
On Wednesday, Florida Governor Ron DeSantis joined the campaign, proposing legislation that would prohibit financial firms that manage the state’s pension funds from considering environmental factors when making investment decisions.
While the coal business is in decline, it is still big business in West Virginia. Taxes from the coal and fossil fuel industries are the third largest source of funding for West Virginia, according to the state. In the most recent fiscal year, the state collected about $769 million in severance taxes from coal and other fossil fuel companies, representing 13 percent of the $5.89 billion in funds collected by the state.
Mr. Moore declined to say whether he accepts the scientific consensus that emissions from burning fossil fuels are leading to catastrophic global warming. Instead, he said that even if that were the case, it was his responsibility to protect the livelihoods of West Virginians.
“At what cost to human flourishing are we willing to impose these kinds of restrictions on access to cheap and reliable electricity?” he said. “As West Virginians, our ability to help power the nation with the natural resources we have is a benefit not only to us, but to the entire country.”
