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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 by West Virginia Treasurer Riley Moore is the first time a state has moved to cut banking ties to major Wall Street firms over their opposition to efforts to slow dangerous global warming.
This year, West Virginia passed a law sponsored by Mr. Moore that would have given financial institutions the power to bar them from doing business with the state if they were found to be “opposed” to fossil fuels.
Last month, Mr Moore sent a letter to six financial firms saying they could be barred from government business, giving them 45 days to respond. In addition to Goldman Sachs and JPMorgan, Mr. Moore has written for 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 hours after West Virginia Sen. Joe Manchin, who has blocked months of passage of President Biden’s flagship climate legislation, announced a surprise deal that would dramatically expand federal support for renewable energy.
Goldman Sachs, JPMorgan, Morgan Stanley and Wells Fargo have said they are significantly reducing financing for new coal projects, while BlackRock is reducing its actively managed holdings in coal companies starting in 2020.
Such moves have become more common on Wall Street as large financial firms move to reduce their financial exposure to industries such as coal, which are a major contributor to global warming and have become profitable in recent years.
Many big companies, including those Mr Moore banned from government trading, have pledged to drastically reduce their own emissions over the next decade and play an active role in supporting the transition to an economy less dependent on fossil fuels. .
Mr. Moore said US Bancorp was excluded from the state’s list of restricted financial institutions because it decided to remove policies against coal financing from its environmental and social risk policy.
Coal is the most harmful fossil fuel. U.S. coal production has been declining for more than a decade due to the expansion of low-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 and holds about $46 million, Mr. Moore said.
Mr. Moore said those contracts will expire at the end of the year and the state will begin looking for new service providers that do not have policies targeting the coal industry. The law does not affect the holdings of the West Virginia Retirement System.
“This decision is short-sighted and unrealistic,” JPMorgan said, adding that “its business practices are not inconsistent with this anti-free market law.”
Blackrock “doesn’t stop energy companies” and “doesn’t follow sectors and industries as policies.”
Morgan Stanley said it was “disappointed” by the decision and “will not stop fossil fuel energy companies.”
Wells Fargo said in a statement that it “values the relationship with the state of West Virginia and our customers, and we do not agree with this decision.”
Goldman Sachs did not immediately respond to requests for comment.
In an interview, Mr. Moore described implementing the new law as an effort to address 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 originates from the fossil fuel industry,” he said. “At the same time, they’re trying to reduce those funds. There is a clear conflict of interest here.”
In the year In 2020, BlackRock took aim at the coal industry in its annual letter to clients, announcing that the company’s managed funds would begin pulling out of coal companies.
The company’s executive committee, led by CEO Larry Fink, wrote that “thermal coal is highly carbon-intensive, has declining economic viability, and is highly vulnerable to regulation.” “We do not believe that the long-term economic or investment rationale of accelerating the global energy transition 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 pollution, including greenhouse gas emissions, and has other environmental, health and safety impacts,” a statement on the bank’s website said. “However, coal-fired power remains a significant source of electricity and contributes to a reliable and diverse supply of energy, particularly in developing economies.”
All five companies targeted by Mr. Moore support environmental, social and governance principles, or ESG, which 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, saying the firm was too focused on ESG priorities.
Opposition to ESG is growing in Republican circles. Former Vice President Mike Pence, the 2024 Republican presidential nominee, recently said he wants to “endorse” ESG.
House and Senate Republicans have recently spoken out against the growing push to integrate climate risk deeper into the financial system.
And more states are poised to crack down on financial institutions backing away from fossil fuels.
Republican lawmakers in a dozen other states have advanced bills similar to the one being implemented in West Virginia, and governors in four states, including Texas and Oklahoma, have signed such laws.
On Wednesday, Florida Gov. Ron DeSantis joined the campaign to introduce legislation that would bar financial firms from making investment decisions on the state’s pension funds.
While the coal business is declining, it is still big business in West Virginia. Taxes from the coal and fossil fuel industries are West Virginia’s third largest source of revenue, according to the state. In the last fiscal year, the state collected $769 million in severance taxes from coal and other fossil fuels.
Mr Moore declined to say whether he accepted the scientific consensus that emissions from fossil fuels were leading to catastrophic planetary warming. Instead, he said, even if that’s the case, it’s his responsibility to protect the lives of West Virginians.
At what cost to human progress are we willing to put these kinds of restrictions on the supply of cheap and reliable electricity? he said. “As West Virginians, being able to help empower the nation with our natural resources is not only beneficial to us, but to the entire nation.”
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