Dive Brief:
- Kentucky’s treasurer on Tuesday placed JPMorgan Chase, Citi, BlackRock and eight other financial institutions on a divestment list over what the state calls a “boycott” of energy companies.
- Kentucky is hardly the first state to make such a move. West Virginia in July said it would stop awarding new state business to JPMorgan Chase, BlackRock, Wells Fargo, Goldman Sachs and Morgan Stanley over the companies’ decisions to cut back on financing to coal companies. Texas placed BlackRock and nine other companies on a divestment list in August.
- “We believe our business practices are in line with Kentucky law, and we are hopeful a deeper look at these facts would lead to reconsideration,” Trish Wexler, a JPMorgan spokesperson, said in a statement seen by Bloomberg and Reuters.
Dive Insight:
Under Tuesday’s action, Kentucky governmental entities have 30 days to notify the state treasurer and any named financial institutions if they own direct or indirect holdings in the companies. The 11 companies then have 90 days to avoid divestment by proving they are not engaging in fossil-fuel boycotts.
“When companies boycott fossil fuels, they intentionally choke off the lifeblood of capital to Kentucky’s signature industries,” the state’s treasurer, Allison Ball, said in a press release Tuesday. “Kentucky must not allow our signature industries to be irreparably damaged based upon the ideological whims of a select few.”
The energy sector accounts for nearly 144,000 jobs in Kentucky, the state said, adding that “natural resources” supply 94.5% of the state’s energy.
“The fact is that we are among the largest financers of the U.S. traditional and renewable energy industries, including in Kentucky, where we serve some of its largest energy companies and utilities,” Wexler said.
The bank finances energy companies, including American Electric Power and Duke Energy Corp. in the state, a source familiar with the matter told Reuters.
Citi declined to comment to Bloomberg or Reuters.
BlackRock, meanwhile, said its “only agenda” is to deliver the best financial results for its clients.
“On behalf of our clients, we have invested approximately $276 billion in energy companies globally,” Christopher Van Es, a spokesperson for the asset manager, said in a statement emailed to Bloomberg. “BlackRock does not boycott energy companies and will continue to be investors across the energy sector.”
BlackRock’s head of external affairs, Dalia Blass, testified last month that the company is a significant investor in ExxonMobil and Occidental Petroleum Corp. The hearing stemmed from BlackRock’s placement on Texas’ divestment list.
Other institutions Kentucky is targeting with its list are: BNP Paribas, HSBC, Danske Bank, Nordea Bank, Swedbank, Svenska Handelsbanken, Schroders and St. Petersburg, Florida-based Climate First Bank.
Kentucky’s list hews fairly closely to Texas’. The inclusion of JPMorgan and Citi are a departure. Texas reportedly considered placing JPMorgan, Wells Fargo and Goldman Sachs on notice, but they did not make the final list.
This is hardly the first time Kentucky has inserted itself in the ideological battle over environmental, social and governance (ESG) investing. Kentucky’s attorney general, Daniel Cameron, was one of 19 state AGs to write BlackRock in August with concerns over the company’s investment strategy.
Cameron, widely speculated as a Republican candidate for governor in Kentucky this year, also sent civil investigative demands — along with 13 other attorneys general — to the U.S.’s six largest banks asking for information on their participation in the U.N.-backed Net-Zero Banking Alliance, a global climate initiative.
That move stoked the ire of the Kentucky Bankers Association, which sued Cameron in November, claiming he allegedly exceeded his legal authority.
Kentucky’s General Assembly last year passed a bill allowing the treasurer to post Tuesday’s divestment list. Under the measure, state governmental entities are required to sell, redeem, divest or withdraw all publicly traded securities of listed companies within a year, except in some cases, such as when divestment would create a loss.
Ball told Bloomberg it was too early to estimate how much money is at risk of divestment. She said the new law would not prevent listed institutions from underwriting most municipal debt in the state.
