Kentucky fires warning shot at finance firms BlackRock, JPMorgan to drop ‘energy company boycotts’

Kentucky warned several financial institutions that do business with the state Tuesday that they’re in jeopardy of being divested from unless they drop their support of ESG investment practices that consider climate change, a stance Republicans deem anti-fossil fuel.

Kentucky Treasurer Allison Ball placed 11 firms on a blacklist, triggering a three-month countdown under a new state law that could make them subject to the divestment of state funds unless the companies put an end to “energy company boycotts.”

“When companies boycott fossil fuels, they intentionally choke off the lifeblood of capital to Kentucky’s signature industries,” said Ms. Ball, a Republican. “Traditional energy sources fuel our Kentucky economy, provide much-needed jobs and warm our homes. Kentucky must not allow our signature industries to be irreparably damaged based upon the ideological whims of a select few.”

The move marked the latest escalation in the multi-billionaire war that Republican-led states are waging against environmental, social and governance issues (ESG), practices that invest in businesses that meet specific ideological standards, usually excluding the fossil-fuel industry that liberals blame for climate change.

The energy sector represents nearly 8% of Kentucky’s workforce, or 143,994 jobs, according to Ms. Ball.

Red states divested nearly $4.3 billion in public funds in 2022 from investment giant BlackRock alone, one of the 11 firms placed on Ms. Ball’s blacklist.

BlackRock flatly denies any form of fossil fuel “boycott,” noting that it has hundreds of billions of dollars invested in domestic and abroad energy companies.

“BlackRock’s only agenda is delivering the best financial results for our clients,” the company told The Washington Times. “On behalf of our clients, we have invested approximately $276 billion in energy companies globally. BlackRock does not boycott energy companies and will continue to be investors across the energy sector.”

The other 10 firms placed on Kentucky’s blacklist included JPMorgan Chase, Citigroup, Climate First Bank, French bank BNP Paribas, Danske Bank of Denmark, British banks HSBC and Schroders, Nordea Bank of Finland, and Swedish banks Svenska Handelsbanken and Swedbank.

JPMorgan Chase also rejected the assertion it boycotts the fossil fuel industry.

“The fact is that we are among the largest financiers of the U.S. traditional and renewable energy industries, including in Kentucky where we serve some of its largest energy companies and utilities,” a spokesperson told The Times.

“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,” the spokesperson said.

JPMorgan emphasized that it works with five of the largest energy and utility companies in Kentucky, including Louisville Gas and Electric, Kentucky Utilities, and three multi-state companies that operate in Kentucky — American Electric Power, Duke Energy and the Tennessee Valley Authority.

JPMorgan also pushed back against the state by suggesting a divestment from institutions with ESG policies would hurt taxpayers by causing higher borrowing rates.

A spokesperson cited a study from the Wharton School of the University of Pennsylvania and the Federal Reserve Board of Governors that found Texas is likely to pay up to an extra $532 million in interest on $32 billion in loans after ceasing business with banks they deem anti-fossil-fuel or anti-guns.

Schroders said in a statement that it seeks “to maximize investment returns for clients,” which means “forward-looking analysis” that includes risks and opportunities “posed by the climate transition.”

“We do not make investment decisions with the intent to penalize or inflict harm on companies or industries, but rather to fulfill our fiduciary responsibility to our clients by identifying investments that we believe are appropriate for their portfolio objectives and meet their mandates and guidelines,” a spokesperson said.

“We believe that the commitments we have made to climate-related initiatives reflect this same responsibility, based on our established investment beliefs and the current direction of political commitments and regulation,” the spokesperson added.

Citigroup declined to comment while the other firms did not respond to requests for comment.

The companies were placed on Ms. Ball’s blacklist under a state law passed last year in Kentucky, which allows the state to divest from financial institutions it deems anti-fossil fuel 90 days after the companies are notified of failing to satisfy the state’s demands.