GOP lawmakers accuse Wall Street of ‘discriminating’ against fossil fuels during coronavirus pandemic

Source: By Dino Grandoni and Paulina Firozi, Washington Post • Posted: Monday, May 11, 2020

Republican members of Congress are coming to the defense of oil, gas and coal companies they say face “discriminatory” lending practices from Wall Street banks that have caved to pressure from environmentalists.

They are worried that oil and gas companies, suffering from the economic shockwaves of the coronavirus pandemic, are not getting their fair share of $2 trillion in stimulus funding because many of the big banks playing a part in distributing the funds have policies against lending to certain fossil fuel projects.

In a letter sent late last week to President Trump, three dozen lawmakers urged the administration to take action against big banks that have decided to limit such lending.

Demonstrators chained themselves together in front of a Wells Fargo Bank branch in Washington, D.C., in 2019. (Michael Robinson Chavez/The Washington Post)

The letter is the latest volley in a battle over cutting off the flow of financing to firms contributing to climate change.

Since the 2016 election, green groups have increasingly put pressure on lenders, insurers, asset managers and other private-sector players to curb support for fossil fuels as their urgent calls about reducing greenhouse gas emissions over the next decade have been ignored by the White House.

But now, GOP lawmakers are concerned that fossil-fuel based companies are being put at a disadvantage when it comes to the once-in-a-century pandemic jeopardizing their businesses.

“As every sector of our economy struggles to survive the COVID-19 pandemic and seeks financial stability from the federal government, environmental extremists are using the pandemic to accelerate their goal of putting America’s energy jobs in the grave,” read the May 7 letter, which was led by Sens. Dan Sullivan (R-Alaska), Kevin Cramer (R-N.D.) and Rep. Don Young (R-Alaska) and signed mostly by lawmakers from oil-, gas- and coal-producing states.

Several top ranking members on Senate and House energy committees signed the letter, including Sens. John Barrasso of Wyoming and Lisa Murkowski of Alaska and Reps. Rob Bishop of Utah and Greg Walden of Oregon.

They specifically point to a decision by BlackRock, the world’s largest money manager, to limit its investment in the coal power business and make managing for sustainability and climate risk a key part of its investing strategy. The firm, along with other big banks, is playing a key role in distributing stimulus funds under the CARES Act.

Last month, Cramer, Sullivan and Young, along with Rep. Liz Cheney (R-Wyo.), raised concerns about whether the asset manager could impartially lend money given its climate pledges.

Caribou migrate onto the coastal plain of the Arctic National Wildlife Refuge in northeast Alaska. (U.S. Fish and Wildlife Service/AP)

“We urge you to ensure that the financial relief offered under the CARES Act is fully available to companies throughout the economy,” the lawmakers wrote in the letter to Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome H. Powell.

But it is unclear how much the Trump administration can do to stop banks from putting money where they want.

In their letter to Trump, GOP lawmakers do not offer any suggestions for what specifically the administration should do to encourage different lending practices during the pandemic.

Blackrock isn’t the only big financial institution that has halted its lending to fossil-fuel projects in recent years. A number of big banks have taken steps to reduce their exposure to fossil-fuel projects.

JPMorgan Chase, Wells Fargo and Citigroup have announced they would curb lending to Arctic oil and gas drilling projects, among other environmental pledges.

Those self-imposed bans will make it more difficult for companies to raise money for exploring and producing in the petroleum-rich coastal plan of Alaska’s Arctic National Wildlife Refuge, which the GOP-led Congress fought hard to open to drilling in 2017.

The latest wave of climate pledges by big banks was kicked off before the pandemic by Goldman Sachs, which decided in December it would no longer lend money to oil and gas projects in the fast-warming Arctic region.

The investment banking giant was followed a month later by BlackRock, which said it would limit its investment in the coal power businessand make managing for sustainability and climate risk a key part of its investing strategy.

Sen. Dan Sullivan (R-Alaska). (Kevin Dietsch/Pool via Reuters)

In making their climate pledges, big banks may be motivated not only by a desire to generate goodwill among shareholders concerned about the environment.

They also likely want to protect their bottom lines.

Many investors are increasingly concerned that many of the crude reserves on the books of oil and gas companies may end up “stranded” — that is, that they will never be tapped because of political and technological changes over the next several decades.

Another Cramer — CNBC host and investment guru Jim Cramer — announced in January well before the pandemic rocked markets that he was “done with fossil fuels.”

And many members of the Rockefeller family, once the biggest name in petroleum during the halcyon days of Standard Oil, decided five years ago to dump its fossil-fuel investments.

“Now it also seems like a smart financial move,” my colleague Steven Mufson reported on Sunday. “The $1.1 billion Rockefeller Brothers Fund — largely free of oil and gas — has outpaced financial benchmarks, defying predictions of money managers.”