West Virginia punishes banks that say they don’t support coal

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West Virginia announced Thursday morning 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 decided to sever banking ties with big Wall Street firms over objections to their efforts to cut dangerous emissions. that warm the planet.

This year, West Virginia passed a law championed by Mr Moore that gave him the power to ban 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 informing them they could be excluded from state business and giving them 45 days to respond. Besides Goldman Sachs and JPMorgan, Mr Moore has written to three other banks – Morgan Stanley, Wells Fargo and US Bancorp – as well as the world’s largest asset manager, BlackRock.

Of the six companies, all but US Bancorp were barred from doing business with West Virginia on Thursday. The move comes just hours after Senator Joe Manchin of West Virginia, who for months blocked President Biden’s efforts to pass major climate legislation, announced a surprise deal that will dramatically expand federal support for renewable energy.

Goldman Sachs, JPMorgan, Morgan Stanley and Wells Fargo have publicly said they are cutting funding for new coal projects sharply, while BlackRock has reduced its actively managed stakes in coal companies since 2020.

Such measures are becoming more common on Wall Street as major financial firms seek to reduce their financial exposure to industries like coal, which is a major contributor to global warming emissions, and has become less profitable in recent years.

Many large companies, including those that Mr. Moore has banned from state operations, have also pledged to significantly reduce their own emissions over the next few decades and to play an active role in supporting a transition to a economy less dependent on fossil fuels. .

Mr Moore said US Bancorp avoided being on the state’s list of so-called restricted financial institutions because it decided to eliminate policies against coal financing from its environmental and social risk policy.

Coal is the dirtiest fossil fuel. Coal production in the United States has been declining for more than a decade, largely due 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 West Virginia’s public university system, and is one of 25 designated custodians for the state, holding approximately $46 million. , according to Mr. Moore.

Mr. Moore said those contracts would be terminated by the end of the year and the state would begin looking for new service providers who did not have policies targeting the coal industry. The law does not affect the assets of the West Virginia retirement system.

Wells Fargo said in a statement that it “appreciates its relationship with the State of West Virginia and our customers there and we disagree with this decision.”

Morgan Stanley said it was “disappointed” with the decision and that it “is not boycotting fossil fuel companies”.

Goldman Sachs, BlackRock and JPMorgan did not immediately respond to requests for comment.

In an interview, Moore described his enforcement of the new law as an effort to address what he described as an inherent conflict of interest in his state, the nation’s second largest coal producer after Wyoming.

“We hand over money to a financial institution that is generated by the fossil fuel industry,” he said. “At the same time, they are trying to decrease these funds. There is an obvious conflict of interest here. »

In 2020, BlackRock took on the coal industry in its annual letter to clients, announcing that company-managed funds would begin to divest from coal companies.

“Thermal coal is very carbon-intensive, becoming increasingly less economically viable and highly regulatory-exposed due to its environmental impacts,” wrote the company’s executive committee, 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 logic 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 electricity generation is one of the largest sources of air pollutants, including greenhouse gas emissions, and has other significant impacts on the environment, community health and safety. localities,” read a statement on the bank’s website. “However, coal-fired power remains an important source of electricity generation and contributes to a reliable and diverse energy supply, especially in developing economies.”

The five companies Mr. Moore has targeted support 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 withdrew about $20 million from BlackRock’s state operating funds because he said the company was excessively focused on ESG priorities.

Opposition to ESG is rising in Republican circles. Former Vice President Mike Pence, a potential 2024 Republican presidential candidate, recently said he wants to “control” ESG

Both House and Senate Republicans have recently spoken out against the growing drive to embed climate risk more deeply into the financial system.

And more and more states are ready to take action against financial institutions that turn away from fossil fuels.

Republican lawmakers in a dozen other states have advanced bills similar to the one applied in West Virginia, and the governors of four states, including Texas and Oklahoma, have signed such laws.

On Wednesday, Ron DeSantis, the governor of Florida, joined the campaign, proposing legislation prohibiting financial firms that manage state pension funds from considering environmental factors when making investment decisions. .

While the coal industry is in decline, it’s still big business in West Virginia. Taxes on the coal and fossil fuel industries are the third largest source of funds for West Virginia, according to the state. In the most recent fiscal year, the state collected some $769 million in severance taxes from coal and other fossil fuel companies, representing 13% of the $5.89 billion in funds collected by the state.

Mr Moore declined to say whether he accepted the scientific consensus that emissions from burning fossil fuels lead 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 Virginia, our ability to be able to help fuel the nation with the natural resources we have is a benefit not just to us, but to the entire country.”

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