Kentucky has joined a growing list of conservative states that have begun to boycott banks they charge are discriminating against the fossil fuel industry.
In compliance with a Kentucky law passed in March, State Treasurer Allison Ball yesterday released a list of banks that “are engaged in energy company boycotts.” This list included Wall Street giants BlackRock, Citibank, JPMorgan Chase, BNP Paribas, HSBC, and six other smaller banks.
“Energy is important in Kentucky,” Ball told The Epoch Times. “It’s important to the nation, but in Kentucky in particular, about 7.8 percent of our labor force is from the energy sector. We have a lot at stake just because it’s a part of our economy.”
Kentucky’s action to protect its fossil fuel industry follows similar measures by West Virginia and Texas last year. Kentucky is the seventh-largest state in coal production and 71 percent of its electricity depends on coal-fired plants. Kentucky is also responsible for 1.6 percent of America’s oil refining capacity and 2 percent of its natural gas storage. More than half of Kentucky households rely on electricity to heat their homes.
“From an ideological perspective, those industries have been have been targeted for the last few years by the ESG movement,” Ball said. “So our state legislature in Kentucky passed last year a bill that said, ‘If you are boycotting the fossil fuel industry, then we don’t want to do business with you as a state.’ We don’t want to use taxpayer dollars to support an ideology that’s actually targeting and harming our signature industries.”
According to the Kentucky law, known as SB205, the banks on the boycott list have 60 days to dispute the charge and 90 days to “cease engaging in energy company boycotts in order to avoid becoming subject to divestment by state governmental entities.”
Derek Kreifels, CEO of the State Financial Officers Foundation, lauded Treasurer Ball’s action, stating: “She and other state financial officers across the country are leading the movement to ensure that money earned by hardworking American families is used in accordance with their values, not weaponized against them.”
Kreifels told The Epoch Times that he expects more states will follow the lead of Kentucky, Texas, and West Virginia in 2023.
“ESG is front and center in this next legislative session,” he said. Issues of concern could range from fossil fuels to firearms, to plains states like Nebraska, Kansas and Iowa working to protect their farming industries that feed the nation.
“We see the harm that ESG is doing, and we applaud any state official who’s willing to stand up to this scam that is being pushed across America from the White House to Wall Street,” he said.
Many of the financial institutions on Kentucky’s boycott list have signed pledges to reduce carbon emissions across their lending and investment portfolios as members of international clubs like Climate Action 100+, the Glasgow Financial Alliance for Net Zero (GFANZ), the Net Zero Banking Alliance (NZBA), and the Net Zero Asset Managers initiative (NZAM). While firms who have joined these groups insist that they remain active investors in fossil fuel companies and do not discriminate against them, investment firm Vanguard is one of the few financial firms to withdraw its membership in these clubs.
“It’s remarkable to me that any of these institutions say that they’re not engaging in boycotts, because they have statements that say that they are, and some of them very explicitly,” Ball said. “Blackrock has been very explicit in wanting to cease business with coal companies.”
At a December hearing before the Texas state senate, representatives from State Street and BlackRock testified that they only join these clubs to discuss climate issues with other members, rather than to force an agenda on companies whose shares they own. Despite the pledge of members of Climate Action 100+ and NZAM to “reach net-zero emissions by 2050 or sooner across all assets under management,” many banks and asset managers insist they are doing no such thing in practice.
BlackRock recently received a three-year exemption from the Federal Energy Regulatory Commission (FERC) to buy up to 20 percent of U.S. public utilities. Vanguard is currently seeking similar approval.
As the largest asset managers in the world, BlackRock, Vanguard, and State Street typically do not divest from fossil fuel companies, but rather buy and hold their shares and work with management regarding the changes they want to see. Larry Fink, CEO of BlackRock, the world’s largest asset manager, issues an annual letter to CEOs that details what he considers the most important topics for them to focus on in the coming year, which often includes “sustainability” issues.
“We engage with companies in our portfolios; we do not divest,” State Street Global Advisors’ Chief Investment Officer Lori Heinel stated at the Texas hearing. But Heinel added: “We do not discriminate against companies in any sector, including energy companies … That means we do not tell those energy companies to shift their strategy or to drill more wells.”
In a May letter to the Texas comptroller, JPMorgan Chase wrote: “We provide financial services to many companies that engage in the exploration, production, utilization, transportation, sale or manufacturing of fossil fuel-based energy and intend to do so in the future. Our credit exposure to Oil & Gas as an industry was $42.6 billion as of December 31, 2021.”
Having pledged allegiance to climate-activist causes, however, these firms are now caught between red states that fear their industries and jobs are being targeted, and blue states that insist they honor their pledges to reduce the use of fossil fuels.
New York City Comptroller Brad Lander, who controls the city’s pension funds, lambasted BlackRock, stating that despite its climate-action pledges, “BlackRock now abdicates responsibility for driving net zero alignment in its own portfolio by saying that it does not ask companies to set specific emissions targets, and that its participation in NZAMi does not mean BlackRock is setting or meeting any net zero targets.”
In a scathing letter last September, in which Lander threatened to withdraw New York City pension funds from BlackRock, he charged that “the fundamental contradiction between BlackRock’s statements and actions is alarming. BlackRock cannot simultaneously declare that climate risk is a systemic financial risk and argue that BlackRock has no role in mitigating the risks that climate change poses to its investments by supporting decarbonization in the real economy.”
BlackRock, State Street, and Vanguard, known as the “Big Three” asset managers, are collectively the largest shareholders in 90 percent of S&P 500 companies. Together, they manage approximately $20 trillion in investment and retirement assets.