Dive Brief:

• Oklahoma has placed BlackRock, JPMorgan Chase, Bank of America, Wells Fargo, State Street and eight other financial institutions on a list restricting them from state contracts valued at more than $100,000 “because they are engaged in boycotts of fossil fuel companies,” the state treasurer’s office said in a statement last week.
• Oklahoma State Treasurer Todd Russ took office in January and, within his first month, sent a questionnaire to financial companies to determine the list, to align with a law the state passed last year. Russ said Wednesday that nearly 160 companies responded.
• JPMorgan, in its own statement Wednesday, called the restriction “baseless.” "As the nation’s largest bank, we are among the top financers across the energy sector, including traditional energy sources," the bank said, according to Fox Business.

Dive Insight:

Oklahoma is hardly the first state to put banks on notice over their environmental, social and governance policies — and goals to taper their carbon footprint. Kentucky, in January, ordered its state pension funds and other governmental entities to divest from JPMorgan Chase, Citi, BlackRock and eight other financial institutions. West Virginia last July said it would stop awarding new state business to BlackRock, JPMorgan, Wells Fargo, Goldman Sachs and Morgan Stanley over the companies’ decisions to cut back on financing to coal companies.

Oklahoma’s neighbor, Texas, maintains a list of 11 restricted financial institutions, though many of the affected banks — HSBC, BNP Paribas and UBS, for example — are foreign-based. U.S. banks such as JPMorgan, Wells Fargo and Goldman Sachs reportedly were on early drafts of Texas’ list but were ultimately left off.

Also like Texas’ law, Oklahoma gives government entities 30 days to report their direct and indirect holdings tied to restricted companies. Restricted companies, meanwhile, have 90 days to convince Oklahoma they don’t belong on the list.

"We look forward to continued discussion with the Oklahoma Treasurer about the many ways we serve clients and communities in Oklahoma, including in the energy sector,” Bank of America wrote in a statement seen by American Banker.

BlackRock, the world’s largest asset manager, has found itself a common target in the ESG fight. Oklahoma’s list shows State Street’s profile is rising, too. Representatives of both companies testified at a December hearing in Texas that their institutions don’t discriminate against certain segments of the energy industry.

“We have one bias: to get the best risk-adjusted returns for our clients,” Dalia Blass, BlackRock’s head of external affairs, told the Texas Senate Committee on State Affairs. 

In a statement Wednesday, BlackRock called itself a “leading investor in the Oklahoma energy sector.” 

"On behalf of our clients, we have invested over $15 billion in public energy companies based in Oklahoma and approximately $320 billion in public energy companies globally, including investments in both traditional energy sectors like oil and gas and in renewables,” a BlackRock spokesperson told Fox Business.

“We believe lists like these ultimately raise costs for Oklahoma taxpayers and reduce returns for firefighters, teachers and state employees seeking to retire with dignity,” the spokesperson added. “They also undermine free-market competition and choice for investors.”

The free-market concept plays prominently, too, in JPMorgan’s statement. 

"Our business practices are not in conflict with this anti-free market decision, and we look forward to continuing to serve customers and communities in Oklahoma,” the bank said. "Between 2021 and 2022 we provided over $2 billion in financing and other services to 40 Oklahoma companies in the oil and gas space.”

Russ, too, touched on the free market.

“It is essential for us to work with financial institutions that are focused on free-market principles and not beholden to social goals that override their fiduciary duties,” the treasurer said. “Our state's financial partnerships should reflect our priorities and values, and it is our responsibility to partner with companies that share our vision for a strong and prosperous Oklahoma economy, and that includes our energy sector.”

Companies may be added to or removed from the restricted list every 90 days as the state’s analysis continues, Russ said.

Other financial institutions placed on Oklahoma’s list are: Climate First Bank, Actis, Firstmark Fund Partners, GCM Grosvenor, Lexington Partners, Stepstone VC Global Partners, WCM investment Management and William Blair.

Republican backlash to ESG policies has gathered steam over the past year or so. Fourteen Republican state attorneys general launched investigations in October into whether the six largest U.S. banks, through their ESG practices, were blocking credit to oil companies. 

Twenty-one Republican AGs wrote Institutional Shareholder Services and Glass Lewis in January, demanding the proxy advisers stop making shareholder voting recommendations — particularly on climate and board diversity — that the attorneys general say contradict the ISS and Glass Lewis’ duty to get investors the best possible financial results.