West Virginia Punishes Banks That It Says Don’t Support Coal

Goldman Sachs and other financial institutions will not be allowed to do business with the state of West Virginia because of their support of the coal industry.

It is the first time a state has severed banking relationships with major Wall Street firms over objections to their efforts to reduce dangerous planet-warming emissions.

If financial institutions were found to be boycotting fossil fuels, West Virginia had the power to bar them from doing business with it.

Mr. Moore gave the financial firms 45 days to respond to the letters he sent to them. Mr. Moore also wrote to Morgan Stanley, Wells Fargo, and U.S. Bancorp, as well as the world's largest asset manager, Blackrock.

None of the firms were allowed to do business with West Virginia on Thursday. The move comes just hours after Senator Joe Manchin of West Virginia, who has blocked the President Biden's efforts to pass major climate legislation, announced a surprise deal that will vastly expand federal support for renewable energy.

Goldman, JP Morgan, Morgan Stanley, and Wells Fargo have all said that they were decreasing financing for new coal projects.

Coal is a major contributor of planet-warming emissions and has become less profitable in recent years as big financial firms move to reduce their financial exposure to the industry.

Many big companies, including those that Mr. Moore has banned from state business, have pledged to drastically reduce their own emissions in the future, and to play an active role in supporting a transition to an economy that is less reliant on fossil fuels.

Mr. Moore said that U.S. Bancorp had decided to remove policies against financing coal from its environmental and social risk policy, which prevented it from being included on the restricted financial institutions list.

Coal is a pollutant. Coal production in the US has fallen for more than a decade due to the expansion of natural gas.

According to Mr. Moore, one of the targeted financial institutions has a relationship with the state and is one of 25 designated depositories.

Mr. Moore said that the contracts would be wound down by the end of the year and that the state would look for new service providers that did not have policies against the coal industry.

Requests for comment from the financial institutions were not responded to.

In an interview, Mr. Moore described his enforcement of the new law as an attempt to remedy a conflict of interest for his state, which is the second largest producer of coal after Wyoming.

He said that the money would be given to a financial institution that was generated from the fossil fuel industry. They want to diminish those funds. There is a conflict of interests.

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In his annual letter to clients in 2020, Larry Fink, the chief executive of Blackrock, announced that the firm's managed funds would begin removing their holdings from coal companies.

He wrote that thermal coal is highly exposed to regulation because of its environmental impacts. We don't think the long-term economic or investment rationale justify continued investment in this sector.

Goldman is one of the banks that said it wouldn't finance new coal projects.

According to a statement on the bank's website, coal fired power generation is one of the largest sources of air pollutants, including greenhouse gas emissions. Coal fired power is a significant source of electricity generation and a contributor to reliable and diverse energy supply.

Environmental, social and governance principles, or E.S.G., is a catchall term that has become a lightning rod for criticism from conservatives.

Mr. Moore pulled 20 million of the state's operating funds from the firm because he said it was too focused on E.S.G. priorities.

The opposition to E.S.G. is growing. The former Vice President said he wanted to "rein in" E.S.G and run for president.

The push to integrate climate risk into the financial system has been opposed by the House and Senate.

More states are going to take action against financial institutions that support fossil fuels.

Republican governors in Texas and Oklahoma have signed laws similar to the one being enforced in West Virginia.

Legislation was proposed by the Governor of Florida that would prohibit financial firms that manage the state's pension funds from considering environmental factors when making investment decisions.

Coal is still important in West Virginia. Coal and fossil fuel taxes are the third largest source of funds in West Virginia. The state collected $769 million in severance taxes from coal and other fossil fuel companies, representing 13 percent of the $5.89 billion in funds collected by the state.

Mr. Moore wouldn't say if he agreed with the scientific consensus that emissions from the burning of fossil fuels are leading to catastrophic planetary warming. He said it was his responsibility to protect the livelihoods of West Virginians.

He wondered if we were willing to impose these types of restrictions on access to cheap and reliable electricity. Our ability to help power the nation with the natural resources that we have is a benefit to the whole country.