“This morning at the ALEC Committee meetings,” Jason Isaac, director of the Koch-funded Texas Public Policy Foundation, wrote last Friday morning, “you’ll have the opportunity to push back against woke financial institutions that are colluding against American energy producers.” The email—obtained by the Center for Media and Democracy, and first reported by CMD investigative journalist Alex Kotch—offers a window into a rapidly congealing strategy among Republican state-level officials: declaring war on “critical energy theory” within the financial sector.
The American Legislative Exchange Council, or ALEC, held its States and Nation Policy Summit in San Diego last week. The event—attended by a mix of state legislators and representatives from the private sector—featured spirited discussions about a potential Constitutional Convention, as well as lots of excitement about Virginia Governor-elect Glenn Youngkin’s attempt to galvanize voters around “critical race theory,” the once-obscure academic subfield that right-wingers now regularly rant about, claiming that CRT has infected the K-12 curriculum and that teaching students accurate facts about slavery and segregation is somehow unfair to white people.
Now ALEC seems gearing up for a similar move on energy policy. The group’s Energy, Environment and Agriculture Task Force, which met on Friday, voted to back two pieces of model legislation that portray climate policy—even climate policy that doesn’t exist yet—as unfairly discriminating against fossil fuel companies. The “Resolution Opposing Securities and Exchange Commission and White House Mandates on Climate-Related Financial Matters” encourages states to take up legal challenges against forthcoming rules from federal financial regulators around climate risk and disclosures, potentially aiming to trigger a similar wave of lawsuits from states that followed the Clean Power Plan during the Obama administration. This follows a letter sent to the “U.S. Banking Industry” by state treasurers, plus a comptroller and auditor, from 16 extraction-heavy, Republican-controlled states just before Thanksgiving, pledging “collective action” against “reckless attacks on law-abiding energy companies.”
The “Energy Discrimination Elimination Act,” voted through unanimously on Friday, directs states to compile a list of entities that are supposedly boycotting fossil fuel companies, explicitly citing banks that are “increasingly denying financing to creditworthy fossil energy companies solely for the purpose of decarbonizing their lending portfolios and marketing their environmental credentials”; institutional investors that are “divesting from fossil energy companies and pressuring corporations to commit to the goal of the Paris Agreement to reduce greenhouse gas emissions to zero by 2050”; and large investments that are “colluding to force energy companies to cannibalize their existing businesses.”
Both draft laws exhibit the emerging right-wing argument that policy that reduces emissions is in fact discriminatory. “Major banks and investment firms,” Isaac argued in his email to participants, urging them to vote for the measure, “are colluding to deny lending and investment in fossil fuel companies, using their market power to force companies to make ‘green’ investments.” The model legislation opposes that, he adds, by setting forth “a strategy in which states use their collective economic purchasing power to counter the rise of politically motivated and discriminatory investing practices.” Texas already has a similar law on the books. Arguing in favor of the bill, Texas state Representative Dennis Paul said there was a need to “stand up to this wokeness.”
State comptrollers would be directed to create and maintain “a list of all financial companies that boycott energy companies,” further allowing them to “request written verification from a financial company that it does not boycott energy companies.” Any company that doesn’t reply to said request within 61 days, per the model bill, would be “presumed to be boycotting energy companies.” Listed companies that don’t stop “boycotting energy companies” within 90 days would then be subject to losing state contracts or investments. State agencies would then be required to “sell, redeem, divest, or withdraw all publicly traded securities” in qualifying companies unless that would “result in a loss in value or a benchmark deviation.” Attorneys general would be empowered to enforce rules mandating that state agencies report which companies they’ve divested from and the “prohibited investments” they still hold.
The legislation is modeled explicitly on “anti-BDS” bills written to counter the Boycott, Divest, Sanctions call from Palestinian civil society groups for economic actions against firms complicit in the Israeli occupation there. But such measures have proven controversial, and in some cases unconstitutional. Arkansas’s version was struck down by the Eighth Circuit U.S. Court of Appeals as a violation of the First Amendment. To counter such claims, Isaac—and those presenting the legislation, according to an attendee who spoke with The New Republic—assured lawmakers that the model bill is in fact constitutional and intended to allow each state to “protect its economic interest,” not breach fiduciary responsibility for ideological reasons.
The move marks a deepening split between a Republican Party committed to ginning up a culture war and major arms of capital. The GOP’s war on renewables is increasingly at odds with large segments of the utility sector that are ditching coal and gas for economic reasons, as well as the financial sector, where environment, social, and governance, or ESG, assets—a largely undefined umbrella category of vaguely socially conscious investments—are on track to exceed $50 trillion by 2025. Finance titans like Larry Fink have been eager to take advantage of investor interest in indistinctly green-tinged asset classes and for public spending on climate to grease the wheels for (i.e., “de-risk”) their involvement in infrastructure that will be critical to the twenty-first century: that is, for states to shoulder the risks of climate investments while corporations collect the rewards.
But contrary to right-wing rhetoric claiming liberals have it in for Exxon investors, growing private-sector buzz around greening the financial sector hasn’t so far included much of a substantive challenge to banks’ or asset managers’ continued investments in fossil fuels. In the five years since the Paris Agreement, the world’s 60 biggest banks have showered fossil fuel projects with $3.8 trillion worth of financing, according to a report released this spring from the Rainforest Action Network and the Sierra Club. The well-publicized Global Financial Alliance for Net-Zero—the allegedly $130-trillion-strong effort launched by former Bank of England turned green central banking guru Mark Carney at the COP26 climate summit in Glasgow last month—included no stipulation that the asset managers involved, including Blackrock, the world’s largest, would need to stop investing in coal, oil, or gas anytime soon. As of last year, Blackrock alone controlled $87 billion in shares of fossil fuel companies.
Like fury around critical race theory, though, the Republicans’ war on critical energy theory doesn’t necessarily need to be rooted in reality. It just needs to get people riled up.
This article has been updated.