West Virginia’s treasurer sees his state’s successful effort to cut off financial institutions that “boycott” fossil fuel companies as a prelude to a broader push against what is known as the environmental, social, and governance, or ESG, movement.
West Virginia made waves last month when it deemed five financial institutions ineligible for state banking contracts on the grounds that they “boycott” fossil fuel companies. The shift away from fossil fuels is part of the larger corporate move toward the prioritization of ESG goals.
The restricted financial institution list included BlackRock, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — some of the biggest financial firms in the world. The determination was made by West Virginia Treasurer Riley Moore’s (R) office after the state legislature empowered him to do so. After successfully cutting off the firms and seeing some early signs that the pressure campaign may be yielding results, Moore is looking to expand the effort.
The pressure was enough to change course for one firm, U.S. Bancorp, according to Moore. He said U.S. Bank changed its no-lending policy to the fossil fuel industry so that it was removed from the list.
“Which is a huge win,” Moore said.
Moore said he heard from the firms that were ultimately blacklisted in writing and had meetings with officials from some of the groups. He said that despite the meetings, the five were not removed from the list because they still maintained policies that were “boycotting the fossil fuel industry.”
“And for us, we had this conflict of interest where we can’t hand our tax dollars that are, a good amount, generated from the fossil fuel industry to financial institutions that are trying to diminish those funds at the exact same time through their policies, so in short, we’re not going to pay for our own destruction,” Moore said.
Several of the companies that were blacklisted by West Virginia have put out statements on the matter.
JPMorgan’s general counsel, Stacey Friedman, noted that the firm has more than $40 billion in credit exposure to oil and gas companies as proof that the bank doesn’t boycott the industry.
“This decision is shortsighted and disconnected from the facts. Our business practices are not in conflict with this anti-free market law,” JPMorgan said in a statement, according to the Financial Times.
In a letter to Moore, Goldman also highlighted that it provided nearly $18 billion in financing for fossil fuel companies last year.
As part of the blacklisting, any existing contracts will be void. The news means the firms will lose access to $18 billion in annual inflows and outflows. Moore said those contracts will be rolled off over the next few months.
It is yet to be seen just how much the pressure campaign will result in firms changing their policies, though the effort isn’t just being pursued by the Mountain State. The governors of Kentucky, Oklahoma, and Tennessee have all signed similar legislation in recent weeks that put forward plans for divesting from firms that boycott the fossil fuel industry.
Tennessee passed legislation that blocks the state from dealing with banks or financial institutions that refuse to work with fossil fuel companies
“This bill would prohibit the state treasurer from entering into a contract or amendment with a state depository if the institution has a policy that prohibits financing to companies in the fossil fuel industry,” said state Sen. Todd Gardenhire (R).
Texas has also been at the forefront of the fight against ESG. Dozens of financial firms under pressure from Texas to avoid divesting from the fossil fuel industry have told the state that they don’t boycott the industry.
The reassurances came after Texas Comptroller Glenn Hegar’s office asked several firms about their policies on environmental standards given the corporate push to move toward renewable energy. He also asked the companies for a list of any mutual funds or exchange-traded funds in their portfolios that prohibit or limit investment in fossil fuels.
Moore said he and the other state treasurers in red states pushing back on ESG initiatives from financial firms have been in close contact about the effort with hopes of making the pressure campaign effective. He said it has been a “concerted” and “coordinated effort” and is encouraging other states to join the group and pass similar legislation.
“This upcoming year, we’re going to see a lot of other states running this exact same kind of legislation, and these financial institutions are going to have to make a choice. They’re going to have to make a decision here,” Moore said.
The treasurer, who has gained outsize attention for his public crusade against the financial firms, said his state is happy to lead the charge but added that “there is a whole army [of states] behind us.”
But that army isn’t just looking to defend the fossil fuel industry.
Moore noted, for example, that some in Louisiana are looking at pushing back on firms that eschew firearm production.
The Louisiana House recently passed legislation that would ban state contracts with firms that limit business with firearm manufacturers. The bill is currently pending passage in the Senate.
“This legislation simply states that with very limited exceptions, large companies that have overreaching policies of discrimination against the firearms industry may not contract with state and local governments for goods and services,” said sponsor Rep. Blake Miguez (R).
“I know that there are state treasurers looking at this as it relates to abortion as well, and so these are all issues that we are all discussing and looking at,” Moore said, though he noted the biggest priority for West Virginia right now is protecting the fossil fuel industry.
Proponents of the campaign against firms that boycott the fossil fuel industry and others contend that they are doing so in order to uphold the free market and that the financial firms that are choking off financing to certain sectors are a distortion in the marketplace.