Bonds

West Virginia treasurer warns new banks of ESG-based blacklisting

West Virginia State Treasurer Riley Moore warned six more financial institutions that they may be placed on the state’s “Restricted Financial Institution List” if they are found to be “boycotting” the fossil fuels industry.

The blacklist is authorized in a 2022 state law spearheaded by Moore authorizing the State Treasury to restrict financial institutions that “have publicly stated they will refuse, terminate or limit doing business with coal, oil or natural gas companies” without a reasonable business purpose.

The treasurer can disqualify a restricted financial institution from the competitive bidding process or from any other official selection process; refuse to enter into a banking contract with a restricted financial institution based on its restricted status; and require an agreement by the financial institution not to engage in boycott of energy companies for the duration of the contract.

“We must remain vigilant to ensure we do not entrust state funds to banks that are engaged in coordinated political efforts to destroy our state’s critical industries,” says West Virginia State Treasurer Riley Moore.

West Virginia State Treasury

The Treasurer’s Office has made an initial determination that the six institutions appear to be engaged in boycotts of fossil fuel companies as defined under state law. The determination was based on a review of each institution’s environmental, social and governance policies and other available statements, Moore said in a statement.

The financial institutions, which were not named by Moore, received notices of potential inclusion on the list last Friday.

However, the Washington Times reported that according to notices it obtained through a public records request, the institutions include Citibank, TD Bank, BMO Bank, Fifth Third Bank, Northern Trust and HSBC Holdings.

The institutions now have 30 days to submit a response. Unless the firms show to the treasurer’s office they are not engaged in a boycott of fossil fuel companies they will officially be placed on the list in 45 days.

One of the firms listed by the Times, HSBC, told the Washington Times it rejected the assertion it is a fossil-fuel “boycotter.”

The restrictions don’t apply to municipal bond issuances by the state because the Treasurer’s Office does not handle bond issuances. They mainly apply to the banking and cash handling functions of the office, which see about $20 billion in inflows and outflows a year. It also does not apply to state pension funds.

Under the 2022 law, the treasurer may exclude banks on the list from eligibility for contracts for state banking services.

It follows a Heritage Foundation template many GOP-run states have copied in a coordinated effort to put state limits on private corporations’ freedom to make investment decisions.

The first West Virginia list was published in July 2022 when Moore determined five financial institutions were engaged in boycotts as defined by state law. The five firms were BlackRock Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Morgan Stanley and Wells Fargo & Co. No updates have been made since then.

Moore says the blacklist protects the traditional extraction industries of West Virginia.

The natural resources industry represents about 3% of West Virginia jobs, according to the West Virginia University’s most recent West Virginia Economic Outlook report, in a state where overall employment lags 2005 numbers, and the population fell more than 3% between 2010 and 2020.

“While the environmental, social and governance or ESG movement might be politically popular in California or in New York, financial institutions need to understand their practices are hurting people across West Virginia,” Moore said at the time.

Last week, Moore praised JPMorgan Asset Management and State Street Global Advisors for their choice to withdraw from Climate Action 100+, an investor-led initiative that aims to make large corporate greenhouse gas emitters take action on climate change.

“This is a step in the right direction and significant victory in our states’ fight against the international corporate collusion targeting the coal, oil and natural gas industries,” Moore said.

In January, Moore applauded the New York Stock Exchange’s decision to curtail the decision making freedom of private sector investors by withdrawing its proposal filed to Securities and Exchange Commission that would have allowed the public listing of Natural Asset Companies, climate-focused corporations designed to convert natural assets into financial capital by taking over land owned by private entities and individuals and the federal, state and local government.

Under the NYSE proposal, NACs would have had “the authority to manage the areas for conservation, restoration or sustainable management” and are prohibited from engaging in fossil fuel-related developments.”

In December, Moore blasted President Joe Biden’s ESG policies after his special climate envoy John Kerry pledged at the 28th United Nations Climate Change Conference that the U.S. would begin a phase-out of all existing coal-based power plants and urged that coal use be eliminated worldwide. Moore urged Congress to use its authority to block the agreements made at the summit.

“West Virginia and our coalition of states have been fighting for years against these efforts to boycott and curtail capital to our critical energy industries and diminish important economic activity and revenue for our states. This is a sign our efforts are making an impact,” Moore said Monday.

Last month, South Carolina Gov. Henry McMaster signed the ESG Pension Protection Act — which requires the state pension fund’s decisions be based on maximizing returns — in a ceremony at the governor’s office.

The bill, H.3690, went into effect on Feb. 9.

It directs that all investment decisions made by the South Carolina Retirement System Investment Commission be based solely on maximizing the highest rate of return and not on ESG factors.

Anti-ESG bills have made a comeback in Arizona and Oklahoma while Texas continued to cull underwriters from its municipal bond syndicate groups.

Other Republican-run states have followed Texas’ lead and enacted laws that have led to underwriter bans. Last year, the Oklahoma Treasurer’s Office produced a list of fossil fuel boycotters.

In Missouri, a trial over the state’s first-of-their-kind ESG investment rules will go ahead after a federal judge rejected the state’s motion to dismiss.

Leaders in GOP states have also battled what they like to call “woke culture” in other areas as well. Wokeness, according to court testimony by an official in anti-ESG leader Florida Gov. Ron DeSantis’ administration, is defined as “the belief there are systemic injustices in American society and the need to address them,” and has become a GOP shorthand attack on liberals and liberal policies.

Last year, DeSantis signed a bill that restructured and renamed the Reedy Creek Improvement District the Central Florida Tourism Oversight District, which ended the governance of the special district by Walt Disney Co.

The Florida Legislature approved a bill in 2022 to dissolve all independent special districts created before 1968. The bill’s authors and DeSantis made it clear it was intended to punish Disney, which had voiced strong political opposition on behalf of its employees to the state’s Parental Rights in Education Act, which critics called the “Don’t Say Gay” bill. The law bans public school instruction about sexual orientation or gender identity for children through the third grade.

Last week, DeSantis unveiled a report about the former Reedy Creek district, commissioned by his appointees in the newly restructured district.

“The district’s recent audit report justified our shared concerns: Disney was acting as a law unto itself,” DeSantis said. “Since our reforms, the new district has taken bold action to increase transparency, community engagement, and fiscal responsibility, and has saved taxpayers $18.4 million.”

The CFTOD has implemented safety inspections by the Florida Department of Transportation, he said, for the Disney monorail system, saying it had lacked FDOT oversight before.

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