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Republicans Say “Woke” Wall Street Is Boycotting Fossil Fuels. The Numbers Prove Otherwise.

State GOP lawmakers are pushing bills to blacklist financial institutions that make net-zero pledges, but a new report shows that banks’ promises don’t match their balance sheets.

Workers outside the New York Stock Exchange
Mario Tama/Getty Images
Workers outside the New York Stock Exchange

To hear a growing number of Republican lawmakers tell it, Wall Street has been infiltrated by radical environmentalists who have set their sights on America’s energy sector. They point to figures like Mark Carney, the sustainable investment guru and former Bank of England head, who convened the world’s largest banks and asset managers into the Glasgow Financial Alliance for Net-Zero, or GFANZ. Carney and BlackRock CEO Larry Fink, these Republicans argue, are using tremendous financial resources to wage an ideological crusade against coal, oil, and gas. Now the legislators want to fight back, statehouse by statehouse: If Wall Street goes after fossil fuels, their states will retaliate in kind.

Accordingly, for the last few months, bills have been percolating through at least half a dozen state legislatures that would order state comptrollers and treasurers to draw up a blacklist of financial institutions deemed to be “boycotting” energy companies. One such measure made it through Kentucky’s statehouse earlier this week. “Major banks and investment firms are denying lending to investments in fossil fuel companies in an effort to promote green investments and political agendas,” Republican state Senator Robby Mills, a sponsor of the bill, told Louisville radio station WFPL.

The spending habits of these banks suggest otherwise: A new report from the Rainforest Action Network, the Indigenous Environmental Network, the Sierra Club, and several other green groups throws cold water on the premise behind these bills.

Amid a high-profile slew of net-zero commitments, 60 private-sector banks invested $742 billion in coal, oil, and gas companies, the report, titled “Banking on Climate Chaos,” finds. Since the Paris Agreement was brokered in December 2015, the same banks have poured $4.6 trillion into fossil fuel companies. Like many others banks on the list, the top four financiers of fossil fuel companies—JP Morgan Chase, Citi, Wells Fargo, and Bank of America—are members of the Net-Zero Banking Alliance, the banking arm of GFANZ. Mills cited the NZBA specifically as evidence that financial institutions were “starving” energy companies of capital, according to WFPL. Within the $742 billion total, banks included in the report funneled $185.5 billion into the world’s 100 most expansionary fossil fuel companies.

“You’ve got all these banks making net-zero commitments, and you look at their financing and it’s mostly chugging along with business as usual,” says Ben Cushing, the Fossil Free Finance Campaign Manager at the Sierra Club and a collaborator on the report. “The idea that the largest Wall Street banks are taking radical climate action or drastically reducing their fossil fuel financing is just not true.”

Republican state lawmakers disagree. Like similar measures in other states, the Kentucky bill took inspiration from a Texas bill signed into law by Governor Greg Abott last year. Helping lead the charge was Jason Isaac, a former GOP state representative in Texas and now director of the Texas Public Policy Foundation’s Life:Powered initiative. Late last year, Isaac wrote to members of the American Legislative Exchange Council, including state lawmakers and private-sector representatives, urging them to adopt the bill as official ALEC model legislation (which Republican legislators could then push in their statehouses, as they have done successfully with ALEC-approved bills such as “Stand Your Ground,” “Right to Work,” and protest criminalization). Isaac framed the “Energy Discrimination Elimination” model bill as an “opportunity to push back against woke financial institutions that are colluding against American energy producers”

“It’s really just their political views. They’re doing this not because of financial reasons,” Isaac told me, of alleged divestments, over the phone. “I thought, ‘When are they going to start discriminating against individuals in the oil and gas industry,” he added, “and denying mortgages and home loans?”

Despite boycott accusations, “Banking on Climate Chaos” shows that there’s still plenty of money flowing to the energy sector. Bank financing for extraction from the Canadian tar sands, for example, jumped 51 percent in 2021 over the previous year. And even drillers don’t say a lack of financing is holding them down. A recent survey conducted by the Dallas Fed found that just 8 percent of oil and gas companies cited a “lack of access to financing” as the reason they’re constraining growth. Eleven percent cited environmental, social, and governance issues, while 59 percent said that they were holding back production under pressure from investors. That’s not because Wall Street is being infected with a radical green agenda so much as because drillers spent a decade burning through their money. By 2019, some 90 percent of shale drillers in the U.S. had negative cash flow.

Asked about this statistic, and whether there might be a legitimate business case for financial institutions moving money out of fossil fuels, Isaac said, “Well, 2019 was a bad year,” and pointed to Covid-19-related shutdowns. After I clarified that the pandemic began in 2020, he said, “I guess I didn’t realize 2019 was a bad year for them.”

But it wasn’t just 2019 or 2020 that were bad for drillers. For the last decade, energy has been the worst-performing sector on the S&P 500 index. Isaac pinned this on BlackRock, which owns 9 percent of the average S&P 500 company and has been outspoken about its climate commitments, having joined the Net-Zero Asset Managers Alliance, or NZAMA, last year alongside fellow “Big Three” asset managers Vanguard and State Street. As BlackRock reiterated in response to the Texas bill, it has nearly $260 billion invested in fossil fuel companies worldwide, including $91 billion in Texas. It holds $85 billion worth of shares in companies that earn less than a quarter of their revenue from coal. “We are perhaps the world’s largest investor in fossil fuel companies, and, as a long-term investor in these companies, we want to see these companies succeed and prosper,” Dalia Blass, BlackRock’s head of external affairs, said in a letter sent to state officials in January.

It’d be hard to argue this constitutes “divestment” from energy companies. “They’re certainly not divesting, but they may be sanctioning, and that may not be in the best interest of shareholders,” Isaac said. He argues that the problem is financial institutions like BlackRock “using their power and their leverage to force companies into the Paris Agreement, which is not the law of the land of the United States. That’s, in my opinion, forcing companies to comply with something that is a sanction of their industry.” (Only national governments can join the Paris Agreement.)

I asked Isaac what it would take for him to feel more positively about BlackRock, and what might keep it off the blacklist the Texas comptrollers’ office is in the process of compiling. He said he’d like to see it leave Climate Action 100+, an investor-led initiative that organizes around climate-related shareholder resolutions, and “abandon their net-zero commitments.”

Facing pressure from climate campaigners, BlackRock has gotten somewhat more active in the last several years in joining shareholder resolutions calling for climate-related disclosures and emissions-reductions targets at oil and gas companies, and it voted against ExxonMobil management last year in support of board challengers from the climate-focused hedge fund Engine No. 1. A report from the nonprofit ShareAction released in December found that BlackRock voted for 56 percent of climate resolutions, below the average among other asset managers signed on to Climate Action 100+ and NZAMA. But it’s worth noting that neither BlackRock nor any other financial institution could single-handedly push through a climate-related shareholder resolution, even if it wanted to. While Isaac noted his concern for energy-company shareholders’ best interests, a majority of shareholders need to vote for the sorts of resolutions he opposes in order for them to pass. Even if shareholder resolutions have picked up at oil and gas companies, bank and asset manager financing for those firms has continued to be generous.

Asset managers are also major shareholders in the banks cited in “Banking on Climate Chaos,” but so far they don’t appear to have raised concerns about the hundreds of billions they’re still pouring into fossil fuel companies each year. Cushing, at the Sierra Club, hopes that might change in banks’ annual general meetings this spring, where shareholders vote on various proposals. “The voting approach of the big asset managers and investors toward banks is still very much in its infancy,” Cushing says. “They are not articulating clear enough expectations and guidelines for how they will be voting on shareholder resolutions or corporate director votes, based on key climate metrics.”

When it comes to climate change, the financial sector’s pledges are still largely rhetorical, having yet to translate meaningfully at any grand scale into either investment decisions or boardroom behavior. That should represent something of a salve for Isaac and others concerned about the rise of “woke financial institutions.” For now, the numbers are clear: Wall Street is getting far more credit for reducing emissions than it deserves.