Kentucky Lists BlackRock, JPMorgan Chase for Divestment Over ‘Ideological’ Energy Boycott

The BlackRock logo outside of its offices in New York on Jan. 18, 2012. (Shannon Stapleton/Reuters)

The State of Kentucky on Tuesday released a list of 11 financial companies that included BlackRock and JPMorgan Chase, warning that they are at risk of divestment because of their ideologically driven boycott of the fossil fuel industry.

“When companies boycott fossil fuels, they intentionally choke off the lifeblood of capital to Kentucky’s signature industries,” Kentucky State Treasurer Allison Ball said in a statement, noting that 143,994 jobs or 7.8 percent of the state’s overall employment are tied to the traditional energy sector.

“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,” she added.

Under a state law enacted in April 2022, Kentucky’s treasurer must publish each year a list of financial companies that engaged in the “energy company boycott.” The law requires state government entities to report their holdings in the listed companies with the treasurer within 30 days of the list’s publication, whiling giving the companies 90 days to cease boycotting energy companies in order to avoid divestment.

Leading 2022’s list was BlackRock, the world’s largest investment manager and leading advocate of “stakeholder capitalism” and “environmental, social, and governance” (ESG) investment practices. The other 10 financial institutions included on the list were BNP Paribas, Citigroup, Climate First Bank, Danske Bank, HSBC, JPMorgan Chase & Co., Nordea Bank, Schroders, Svenska Handelsbanken and Swedbank.

In response to Kentucky’s action, BlackRock claimed that its “only agenda is delivering the best financial results for our clients.”

“On behalf of our clients, we have invested approximately $276 billion in energy companies globally,” the New York-headquartered multinational firm said in a statement. “BlackRock does not boycott energy companies and will continue to be investors across the energy sector.”

ESG Deemed Inconsistent with Kentucky Law

Tuesday’s announcement comes after Kentucky Attorney General Daniel Cameron, in response to a question from Ball’s office, said in a legal opinion that those who are entrusted with Kentucky tax payers’ pension money should not embrace “stakeholder capitalism” or ESG practices.

“What [stakeholder capitalism] means in reality is that investment management firms who embrace stakeholder capitalism propose prioritizing activist goals over the interests of their public and state employee clients,” Cameron explained in the May 2022 opinion (pdf), adding that ESG is but a means to achieve this version of “capitalism.”

“Investment management firms have publicly committed to coordinating joint action for ESG purposes, such as reducing climate change,” Cameron continued. He further noted that these purposes, regardless of whether they have any actual benefit, are irrelevant to the sole lawful duty for those who manage Kentucky people’s money.

“Fiduciaries must have a single-minded purpose in the returns on their beneficiaries’ investments,” he wrote. “To do otherwise risks breaching clearly established statutory and contractual fiduciary duties and threatens the stability of already fragile pension systems.”

By the end of 2022, six states—Florida, Missouri, Louisiana, South Carolina, Texas, and West Virginia—announced that they are divesting state pension funds from BlackRock, citing disagreement with the “stakeholder capitalism” and ESG agenda. Some other states, notably Nebraska and Kentucky, are expected to join them.