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

West Virginia announced Thursday morning that five major financial institutions, including Goldman Sachs and JPMorgan, will be barred 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 break banking relationships with major Wall Street firms due to objections to their efforts to cut dangerous planet-warming emissions. .

This year, West Virginia enacted a law championed by Mr. Moore that gave him the authority to ban financial institutions from doing business with the state if they are found to be “boycotting” fossil fuels.

Last month, Mr. Moore sent letters to six financial firms notifying them that they could be banned from conducting state business and giving them 45 days to respond. In addition to Goldman Sachs and JPMorgan, 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 companies, all but US Bancorp were barred from doing business with West Virginia on Thursday.

Goldman Sachs, JPMorgan, Morgan Stanley and Wells Fargo have all said publicly that they were slashing funding for new coal projects, while BlackRock has been cutting its holdings in coal companies since 2020.

Such moves are becoming more common on Wall Street as big financial firms move to reduce their financial exposure to industries like coal, which is a major contributor to planet-warming emissions and has become less profitable in recent years. last years.

Many large companies, including those that Mr. Moore has banned from state businesses, have also pledged to slash their own emissions in coming decades and to play an active role in supporting a transition to an economy that relies less on fossil fuels. .

Moore said US Bancorp had avoided listing so-called restricted financial institutions on the state list because it had decided to remove policies against coal financing from its environmental and social risk policy.

Coal is the most polluting fossil fuel. US coal production has been declining for more than a decade, largely thanks to the expansion of cheap natural gas.

Some of the selected 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 Moore.

Mr. Moore said those contracts would be settled by the end of the year and the state would begin looking for new service providers that did not have policies targeting the coal industry.

The financial institutions did not immediately respond to requests for comment.

In an interview, Mr. Moore described the implementation of the new law as an effort to remedy what he described as an inherent conflict of interest for his state, the second largest coal producer in the country after Wyoming.

“We are giving money to a financial institution that is generated from the fossil fuel industry,” he said. “At the same time, they are trying to decrease those funds. There is a clear conflict of interest there.

In 2020, BlackRock CEO Larry Fink took aim at the coal industry in his annual letter to clients, announcing that funds managed by the firm would begin divestment from coal companies.

“Thermal coal is significantly carbon intensive, becoming less and less economically viable, and highly exposed to regulation due to its environmental impacts,” he wrote. “With the global energy transition accelerating, we do not believe the long-term investment or economic rationale warrants continued investment in this sector.”

Goldman Sachs is one of the banks that has said it 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,” reads a statement. communicated 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, particularly in developing economies.”

The five companies Moore is targeting support environmental, social and governance principles, or ESG, an umbrella term that has become a lightning rod for criticism from conservatives.

This year, Mr. Moore took about $20 million out of BlackRock’s estate operating funds because he said the company was overly focused on ESG priorities.

Opposition to ESG is growing in Republican circles. Former Vice President Mike Pence, a likely 2024 Republican presidential contender, recently said he wanted to “stop” ESG

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

And more states are prepared to crack down on financial institutions that are moving away from fossil fuels.

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

On Wednesday, Florida Governor Ron DeSantis joined the campaign, proposing legislation that would prohibit the financial companies that manage the state’s pension funds from considering environmental factors when making investment decisions.

Although the coal business is declining, it is still big business in West Virginia. Taxes from 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 about $769 million in severance taxes from coal and other fossil fuel companies, accounting for 13 percent of the $5.89 billion in funds collected by the state.

Moore declined to say whether he accepted the scientific consensus that emissions from burning fossil fuels are causing catastrophic global warming. Instead, he said that even if that were the case, it was his responsibility to protect West Virginians’ livelihoods.

“At what cost to human flourishing are we willing to inflict these kinds of restrictions when it comes to access to cheap, 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.”

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