BlackRock, JPMorgan Chase, others respond to boycott notices from West Virginia state treasurer
Six financial institutions that West Virginia Treasurer Riley Moore contacted over their alleged boycotting of the fossil fuel industry have replied, denying the accusations while laying the groundwork for what could be a protracted legal battle.
The Epoch Times obtained the letters through a West Virginia Freedom of Information Act request.
Moore sent letters to BlackRock, JPMorgan Chase, U.S. Bancorp, Wells Fargo, Goldman Sachs, and Morgan Stanley on June 10.
That was in line with a new West Virginia law that limits the state’s ability to do business with financial institutions believed to be boycotting energy companies with ties to coal, oil, or natural gas production.
The companies had to respond to the letters within 30 days of receiving them to avoid being placed on a list of restricted financial institutions, which would have been published 45 days after Moore’s office sent them. The West Virginia State Treasurer’s Office still intends to publish a list of restricted financial institutions.
Coal, natural gas, and oil are important sources of revenue for the state, including through what are known as severance taxes.
In fiscal year 2022, West Virginia collected almost $800 million in such taxes, more than the nearly $300 million collected during the previous fiscal year.
In addition to providing direct tax revenue, the fossil fuel industry is a significant driver of the state’s overall prosperity.
A West Virginia University research report found that coal power and coal mining were collectively responsible for roughly $13.9 billion in economic activity in West Virginia in 2019.
Sen. Joe Manchin
Unsurprisingly, one of the few national-level Democrats who defend fossil fuels is Sen. Joe Manchin (D-W.Va.).
On July 14, Manchin made it apparent that he wouldn’t back resident Joe Biden’s efforts to finance additional climate and energy programs.
The move prompted one University of California–Santa Barbara political science professor to write on Twitter that she was “holding [her] children and sobbing.”
Rep. Ilhan Omar (D-Minn.), Sen. Martin Heinrich (D-N.M.), and other Democrats have since taken aim at Manchin’s chairmanship of the Senate Energy and Natural Resources Committee.
Moore, a Republican, thinks Democratic rhetoric and policies targeting the fossil fuel industry have helped shift voters in West Virginia, a state long dominated by Democrats, toward the Republican Party.
“We have union members voting for us in large numbers now, which was not the case previously,” Moore told The Epoch Times on July 18.
‘Risk Management’
The banks and financial institutions that received letters have argued that their various policies on fossil fuel financing don’t qualify as boycotts, claiming that they’re covered by the ‘reasonable business purpose’ exemption in West Virginia’s new law.
“The Company’s reasonable business purpose for any determination not to proceed with a transaction includes assessment of both commercial viability and risk management for the Company and its clients,” Goldman Sachs’s letter reads.
It also noted that it tells firms in the energy sector that a diversification strategy tends to make companies “much more successful in obtaining financing.”
“That is the basis for the note in the Company’s Environmental Policy Framework, available on its public website, about the phasing out, over time, of financing of thermal coal mining companies that do not have a diversification strategy within a reasonable timeframe,” the letter reads.
Goldman Sachs’s letter also states that the company doesn’t back energy firms if their financing supports new thermal coal mines, mountaintop removal mining, new coal plants that lack carbon capture or equivalent technologies, and new upstream oil drilling in the Arctic.
Similarly, Wells Fargo asserted that its limitations on the financing of coal, its “additional levels of due diligence to companies in the oil and gas and mining industries,” and its unwillingness to fund oil drilling in the Arctic reflect a reasonable business purpose—namely, risk management.
Morgan Stanley explicitly argued that its risk management strategy encompasses “the risks of climate change” to “our reputation and client relations.”
In its own “Environmental and Social Policy Statement,” Morgan Stanley pledges to not finance new coal plants without carbon capture or similar technologies and to not finance new thermal coal mining.
“By 2030, we will phase out our remaining credit exposure to companies with greater than 20% of revenue from thermal coal mining globally,” the policy statement reads.
JPMorgan Chase made a very similar argument in its letter to the West Virginia State Treasurer’s Office.
Like Wells Fargo and other firms that responded to Moore’s letters, JPMorgan Chase stated that it already provides significant financing to the energy industry, countering the argument that they’re boycotting it.
Yet, the language in West Virginia’s law refers not merely to full de-banking, but more broadly to any action “intended to penalize, inflict economic harm on, or limit commercial relations with a company” involved in fossil fuels or doing business with a fossil fuel company.
This includes actions on a firm because it “does not commit or pledge to meet environmental standards beyond applicable federal and state law.”
Wells Fargo, for its part, pointed out that it recommended against a resolution at its 2022 shareholder meeting that would have seen it “adopt a boycott-like policy prohibiting lending to or underwriting new fossil fuel development.” That resolution failed to pass.
Law Professor Questions Responses
William J. Carney, Charles Howard Candler professor of law emeritus at Emory Law School, didn’t find the financial institutions’ arguments convincing.
In a July 15 email interview with The Epoch Times, Carney noted that some of the banks and financial institutions “claim ‘environmental risks,’ which involves either the risk of government regulations or a risk of reduced demand for their products.”
“Rising oil prices put the lie to the price risk, as does President [Joe] Biden’s trip to Saudi Arabia to beg for more output,” he said. “Government regulation is dependent on politics, which currently suggests a consumer revolt against anti-energy policies.”
Carney said he strongly disagrees with the overall push for de-banking oil, coal, and natural gas companies.
“Obviously it is suicide for local banks to boycott fossil fuel companies in West Virginia. The entire anti-carbon fuel movement is predicated on a false assumption: that global warming is caused by the use of fossil fuels,” he said. “[Boards] that act on this assumption have not engaged in a reasonable inquiry, and thus should not be protected by the Business Judgment Rule.”