West Virginia on Thursday announced that five major financial institutions, including Goldman Sachs and JPMorgan, would be barred from doing business with the state because they have stopped supporting the coal industry.
The announcement, made by West Virginia’s treasurer, Riley Moore, is the first time a state has moved to sever banking relationships with major Wall Street firms over objections to their efforts to reduce dangerous planet-warming emissions.
This year, West Virginia enacted a law championed by Moore that gave him the authority to bar financial institutions from doing business with the state if they were found to be “boycotting” fossil fuels.
Last month, Moore sent letters to six financial firms notifying them that they could be barred from 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 firms, all but US Bancorp were barred on Thursday from doing business with West Virginia. The move comes just hours after Senator Joe Manchin, Democrat of West Virginia, who for months has blocked President Biden’s efforts to pass major climate legislation, announced a surprise deal that would radically expand federal support for renewable energy.
Goldman Sachs, JPMorgan, Morgan Stanley, and Wells Fargo have publicly said they were sharply reducing financing for new coal projects, while BlackRock has been reducing its actively managed holdings in coal companies since 2020.
Such moves are increasingly common on Wall Street as big financial firms move to reduce their financial exposure to industries such as coal, which is a major contributor of planet-warming emissions and has become less profitable in recent years.
Many big companies, including those that Moore has banned from state business, have also pledged to drastically reduce their own emissions in the coming decades and to play an active role in supporting a transition to an economy that is less reliant on fossil fuels.
Moore said US Bancorp had avoided inclusion on the state’s list of so-called restricted financial institutions because it had decided to eliminate policies against financing coal 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, thanks largely to the expansion of lower-cost natural gas.
Some of the targeted financial institutions 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.
Moore said that those contracts would be wound down by the end of the year and that the state would begin looking for new service providers that did not have policies targeting the coal industry. The law does not affect the holdings of the West Virginia pension system.
JPMorgan said, “This decision is shortsighted and disconnected from the facts,” adding that its “business practices are not in conflict with this anti-free market law.”
BlackRock said it “does not boycott energy companies” and does “not pursue divestment from sectors and industries as a policy.”
Morgan Stanley said that it was “disappointed” in the decision and that it “does not boycott fossil fuel energy companies.”
Wells Fargo said in a statement that it “values its relationship with the State of West Virginia and our clients there and we disagree with this decision.”
Goldman Sachs did not immediately reply to requests for comment.
In an interview, Moore described his enforcement of the new law as an effort to remedy what he described as an inherent conflict of interest for his state, the nation’s second-largest producer of coal after Wyoming.
“We’re handing money over to a financial institution that is generated from the fossil fuel industry,” he said. “At the same time, they’re trying to diminish those funds. There’s a clear conflict of interest there.”
In 2020, the BlackRock took aim at the coal industry in its annual letter to clients, announcing that the firm’s managed funds would begin divesting from coal companies.
“Thermal coal is significantly carbon intensive, becoming less and less economically viable, and highly exposed to regulation because of its environmental impacts,” wrote the company’s executive committee, which is led by CEO Larry Fink. “With the acceleration of the global energy transition, we do not believe that the long-term economic or investment rationale justifies continued investment in this sector.”
Goldman Sachs is among 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 on the bank’s website. “However, coal fired power is still a significant source of electricity generation and a contributor to reliable and diverse energy supply, particularly in developing economies.”
All five companies targeted by Moore support environmental, social, and governance principles, or ESG, a catchall term that has become a lightning rod for criticism from conservatives.
This year, Moore pulled about $20 million of the state’s operating funds out of BlackRock because he said the firm was excessively focused on ESG priorities.
Republican lawmakers in a dozen other states have advanced bills similar to the one being enforced in West Virginia, and governors in four states, including Texas and Oklahoma, have signed such laws.