Republican officials are intensifying their feud with firms over their green finance practices, cutting off state business with big banks and fund managers that have accommodated environmental, social, and governance principles into their investment strategies.
But these firms are not giving up on fossil fuels yet.
GOP state treasurers in Louisiana and South Carolina recently announced the divestment of nearly $1 billion worth of collective state holdings in BlackRock. That added to the ranks of states that have blacklisted the globe’s largest fund manager and other big financiers for overseeing an ESG-informed “boycott” of fossil fuels or for otherwise embracing “anti-fossil fuel” investment policies.
The firms have all, to one degree or another, pledged to help facilitate the U.S. economy’s shift to greener sources of energy to mitigate climate change. Nevertheless, the campaign against firms that embrace ESG, a broad set of investment principles seeking to serve an economywide “transition” away from fossil fuels, is being sustained despite the fact that targeted institutions continue to invest in many fossil fuel projects and issue strong defenses for doing so, particularly in light of the war in Ukraine’s upending of global energy markets.
These are some of the top financial institutions in Republican crosshairs and what they’ve been doing on fossil fuels.
BlackRock
Beyond Louisiana’s and South Carolina’s divestment announcements, West Virginia Treasurer Riley Moore and Texas Comptroller Glenn Hegar, both Republicans, have included the New York-based money manager, among others, in their lists of financial firms deemed to be engaged in a “boycott” of energy companies dealing in fossil fuels.
BlackRock, which oversees trillions in assets, has recognized climate change to be an investment risk, and in April, it announced an investment target indicating at least 75% of BlackRock corporate and sovereign assets “managed on behalf of clients will be invested in issuers with science-based targets or equivalent” by 2030. All of this implies a general imperative to finance more green energy and less traditional fossil fuels, whatever the pace.
The firm is acting especially aggressively against thermal coal, having pledged to prohibit future direct investments in companies that generate more than 25% of their revenues from thermal coal production.
At the same time, BlackRock has continued to fund other fossil fuel projects. For example, it was party to a $15.5 billion deal finalized in December 2021 to finance natural gas pipelines in Saudi Arabia.
Chairman and CEO Larry Fink has defended such investments, and in his annual 2022 letter to CEOs circulated in January, he said the economy needs “to pass through shades of brown to shades of green.”
“To ensure continuity of affordable energy supplies during the transition, traditional fossil fuels like natural gas will play an important role both for power generation and heating in certain regions,” he said.
More recently, in response to the GOP pressure campaign, BlackRock said it has invested $170 billion in American energy companies on behalf of clients, “including pipelines and power generation facilities.”
JPMorgan Chase
GOP state officials have also targeted JPMorgan Chase, one of the six largest banks in the United States, with West Virginia barring the bank back in July from entering into banking contracts with the state.
“Accelerating the low-carbon energy transition” and “encouraging actions that set a path for achieving net-zero emissions by 2050” are how the bank sees its financing responsibilities, according to public announcements.
To that end, JPMorgan Chase released an environmental and social policy framework in October 2021 stating that the firm will not supply financing or advisory services to clients who get most of their revenues from the extraction of coal. It also targets the end of 2024 to phase out “remaining credit exposure to such clients.”
Financing will also not be made available to projects where it will be used for new upstream, midstream, or downstream oil and gas development in the Arctic.
Like BlackRock, though, JPMorgan Chase has invested greatly in the fossil fuel sector. The firm provided more than $382 billion in financing for the sector between 2016 and 2021, according to “Banking on Climate Chaos,” a joint report developed by analysts at several environmental groups, including Sierra Club and Reclaim Finance. Nearly $62 billion was made available last year alone.
Moreover, JPMorgan’s top dog, CEO Jamie Dimon, said the world “is not producing enough oil and gas to reduce coal” and “make the transition [to green energy]” in a recent interview with CNBC.
Dimon indicated his bank sees the continued investment as necessary to enable economic growth. He told Rep. Rashida Tlaib (D-MI) during a congressional hearing last month that maintaining a policy against funding new oil and gas ventures, something supported by many Democrats and environmental groups, would be a “road to hell for America.”
Goldman Sachs and Wells Fargo
Both investment banks have committed to reaching net-zero financed emissions by 2050. Goldman’s scenario for reducing emissions from its portfolio requires an “unprecedented shift away from fossil fuels, including natural gas, and toward renewable power generation in both emerging and developed markets,” the bank said in its most recent year-end 2021 Taskforce on Climate-Related Financial Disclosures report.
Wells Fargo, meanwhile, has pledged to deploy $500 billion in “sustainable financing” by 2030 and to disclose financed emissions for the oil, gas, and power sector items in its portfolio no later than the end of 2022.
Those goals do not preclude continued financing of traditional fossil fuel projects, executives representing both have said.
“If we’re too aggressive in the context of how we direct capital to the private sector, that can be more inflationary,” Goldman CEO David Solomon said in October 2021, before the war in Ukraine exacerbated existing challenges in oil, gas, and coal markets that have sent governments, including those in green Europe, clamoring for new investment in gas infrastructure to secure future supplies.
