With the divestment movement suffering a long and embarrassing string of failures on university campuses and in cities and states across the country, financial institutions are now facing increased pressure from activists to divest and take Environmental, Social and Governance (ESG) factors into consideration. Recently, Bank of the West succumbed to the pressure and announced it was divesting from “coal, tar sands, shale oil and artic drilling – and investing and financing the transition to more sustainable energy sources.”
The announcement, which comes as little surprise given the political leanings of the bank, reeks of hypocrisy and has drawn swift rebuke from political and financial leaders across the West.
Bank of the West, or as it should be known – Bank of the “Far” West, is based in San Francisco, where divestment activists have long pushed (albeit unsuccessfully) a radical agenda to try and stop banks and the city’s public pension funds from investing in fossil fuels. Furthermore, Bank of the West is a subsidiary of the French bank PNB Paribas, which last year announced it was halting the financing of shale and oil sand projects as part of its commitment to addressing climate change.
Bank of the West’s decision to follow in the footsteps of its parent company and put politics ahead of good financial policy is already costing the company business and leading to sharp criticism.
Last week, Wyoming State Treasurer Mike Gordon announced that Wyoming was “closed for business” to Bank of the West and that state funds would no longer be placed with the bank. Oil and natural gas is the backbone of Wyoming’s economy and provides 70 percent of state revenue. He also plans to look into removing $300,000 in state funds that are currently held with the bank. Wyoming Governor Matt Mead also threatened to revoke the bank’s status as a public depository, which would prohibit state agencies from using Bank of the West for petty cash accounts.
U.S. Senator John Barrasso, chairman of the Senate Committee on Environment and Public Works, called the new policy a “regretful mistake” in a letter to Bank of the West’s CEO:
“This misguided and politically expedient decision is a direct attack on hardworking families in Wyoming and across the country that depend on fossil fuels for energy security, jobs and economic growth. While it may be fashionable today in San Francisco to exclude states like Wyoming from your lending plans, it will do little to discourage us from pursuing our best future on our terms.”
The blowback has also been strong in Colorado, where County Commissioners in Moffat County announced plans to pull accounts and transfer funds to a different bank following the announcement. In addition, a Bank of the West Branch Manager and Vice President in Craig, Colorado announced plans to resign from the bank in protest following 27 years with the company, noting that she “stand[s] by the coal community.”
The move by Bank of the West is also hypocritical since they are still willing to accept and hold money generated from oil and natural gas, as noted by Treasurer Gordon: “Making a statement like this not only smacks of politics on their part, but in some ways seems hypocritical if they’re willing to accept money made from our industries. That’s problematic.”
Bank of the West’s announcement comes as a new report was released by University of Chicago Law School Professor Daniel Fischel and the economic consulting firm Compass Lexecon, which found that the Colorado Public Employees’ Retirement Association (PERA) and the New York State Common Retirement Fund would lose millions of dollars every year if they were to fully divest from fossil fuels. This adds to the growing body of academic studies highlighting the costs and risks associated with divestment.