Four financial institutions have been cast into darkness for state banking services over their environmental policies.
State Treasurer Riley Moore’s office this week said it has placed Citigroup Inc.; TD Bank, N.A.; The Northern Trust Company and HSBC Holdings, PLC onto the state’s Restricted Financial Institution List.
That means they are excluded from eligibility for contracts for state banking services. The Investment and Banking Division with the Treasurer’s Office managed nearly $22 billion in cash transactions over the past year. Because of Moore’s action, the four firms are now ineligible to participate in that business.
“We cannot allow institutions that seek to destroy our state’s critical energy industries and the economic activity they generate to also profit from handling the very taxpayer dollars they seek to diminish,” Moore, a Republican who is running for Congress, stated in a press release from the Treasurer’s Office.
“My action today represents our continued commitment to protect state funds from furthering these politically motivated, subjective ESG policies that attempt to cut off financing for our coal, oil and natural gas industries and harm our state.”
The letters that were sent to the companies included short, boilerplate reasoning. For example: “I am writing to inform you that the West Virginia State Treasurer has reviewed your response and has determined that The Northern Trust Company has failed to demonstrate that it is not engaged in a boycott of fossil fuels.”
The firms that are being barred from banking the state’s dollars submitted memorandums to dispute the determination, according to documents obtained through a Freedom of Information request.
For example, TD Bank said it is not engaged in a boycott of energy companies and that it instead is guided by a risk-based approach to fossil fuels: “Our approach to fossil fuels helps us manage and control several heightened financial risks to the Bank that can arise from serving fossil fuel-dependent businesses, including credit risk.”
Northern Trust similarly said it is not engaged in boycotts of energy companies.
“Northern Trust does not have a written policy, procedure or a blanket investment guideline restricting or prohibiting investment in energy companies, including companies engaged in the exploration, production, utilization, transportation, sale, or manufacturing of fossil fuel-based energy,” the company wrote.
HSBC and Citigroup also sent letters saying they do not engage in boycotts of energy companies but do manage risk for investors.
“Citi is not engaged in a boycott of energy companies as evidenced by the fact that it remains a significant lender to the sector. Citi has over $40 billion in credit exposure to the fossil fuel energy sector. Moreover, Citi has demonstrated its commitment to working with companies through the energy transition,” that firm said.
“Given this breadth of exposure, it cannot reasonably be said that Citi boycotts energy companies.”
Two other institutions — BMO Bank and Fifth Third Bancorp — were notified in February that they were under scrutiny for inclusion on the list. Since then, according to the Treasurer’s Office, they were able to demonstrate that their policies did not necessitate inclusion.
“After receiving our initial notice, both Fifth Third Bancorp and BMO Bank worked with my office to clarify their policies and ensure they are not harming our fossil fuel industries,” Moore stated.
“Specifically, BMO Bank removed an offending policy published on their website after receiving our letter and subsequently demonstrated other existing policies had been revoked. I applaud both of these institutions for working with us in a cooperative way to ensure the free market remains free and our state’s critical industries are treated fairly.”
These are outcomes of the 2022 passage of Senate Bill 262, directing the Treasurer to keep a list of financial institutions that steer clear of investments in fossil fuel companies, possibly resulting in decisions to withhold state deposits from those bankers.
The law defines a boycott as refusal to deal with a company without “a reasonable business purpose” — particularly when the company seeking financing does business in fossil fuels markets or does business with other companies involved with fossil fuels.
A reasonable business purpose is then defined as promoting the financial success or stability of a financial institution, mitigating risk to a financial institution, complying with legal or regulatory requirements or limiting the liability of a financial institution.
The law indicates the treasurer may rely on information such as a financial institution’s certification that it is not involved in a boycott of energy companies, publicly available statements or information made by the financial institution or its top representatives or information published by a state or governmental entity.
In the cases of the four most recent firms added to the list, the Treasurer’s Office says they were assessed by review of each institution’s own environmental, social and governance (ESG) policies and other publicly available statements.
The first institutions to be placed on West Virginia’s list were BlackRock Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. They are still there.
“Following a financial institution’s inclusion on the Restricted Financial Institution List, the Treasurer will remove the institution from the list if the institution demonstrates that it has ceased all activity that boycotts energy companies,” according to the Treasurer’s Office.
