West Virginia Penalizes Major Companies for Embracing ESG Principles
Yesterday, the state treasurer of West Virginia formally barred his state from conducting business with five major financial institutions because, according to him, "[e]ach financial institution . . . has published written environmental or social policies categorically limiting commercial relations with energy companies engaged in certain coal mining, extraction or utilization activities . . . . These policies explicitly limit commercial engagement with an entire energy sector based on subjective environmental and social policies."
This action by West Virginia is unsurprising; the legislature of West Virginia had enacted a law at his urging enabling this sort of boycott, and his office had issued letters about six weeks ago to six financial institutions demanding an explanation for why they should not be barred from conducting business with the state of West Virginia. (Although six institutions had been targeted originally, one--U.S. Bancorp--was removed from the list because it "demonstrated to the Treasurer that it has eliminated policies against financing coal mining, coal power and pipeline construction activities from its Environmental and Social Risk Policy.") That said, this action is the first occasion when a state has formally announced the termination of its relationship with major financial institutions based upon the companies' support of policies intended to combat climate change.
It is likely that this action by West Virginia is merely the first salvo in an escalating cascade of efforts by red states--including major fossil fuel producers, such as Texas and Oklahoma, which already have the statutory authority to do so--to penalize major companies that are adopting efforts to disengage from the fossil fuel industry (particularly coal production). Several Republican-led states have been advocating these efforts, including Florida, where Governor DeSantis recently proposed that financial firms managing the state's pension funds be prohibited from considering environmental factors when making investment decisions. These political efforts could ultimately culminate in a bifurcation of the marketplace between companies willing to embrace environmentally-conscious principles, and those that deliberately market themselves by their refusal to do so.
West Virginia State Treasurer Riley Moore today announced he has published West Virginia’s first Restricted Financial Institution List, deeming five financial institutions ineligible for state banking contracts.
Treasurer Moore has determined that BlackRock Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. are engaged in boycotts of fossil fuel companies, according to a new state law, and are no longer eligible to enter into state banking contracts with his Office.