Rohan Naik

I. Introduction

On the morning of July 28, 2022, West Virginia’s treasurer, Riley Moore, published the state’s first “Restricted Financial Institutions List.”[1] That list deemed that five financial institutions, BlackRock, Goldman Sachs, JPMorgan Chase & Co., Morgan Stanely, and Wells Fargo & Co, were no longer eligible to enter state banking contracts with the state of West Virginia because of the companies’ “boycott of fossil fuel companies.”[2] Moore further stated that “any institution with policies aimed at weakening our energy industries, tax base and job market has a clear conflict of interest in handling taxpayer dollars.”[3] On Twitter, he was even more direct. That morning, referencing the Restricted Financial Institutions List, he tweeted “This is how we beat ESG. We will not sit by and let banks boycott the lifeblood of our state.”[4] The announcement came just months after the state passed a law allowing the treasurer to ban certain businesses from doing business with the state if they were found to be engaged in a boycott of energy companies.[5] Of course, banks have disagreed that their actions amount to a boycott; they have noted that while they will not finance certain aspects of the coal industry, that does not amount to a boycott.[6] The treasurer’s decision, which has spread beyond West Virginia, has the potential to upend American financial infrastructure, state budgets, and the federal government’s fight against climate change.

II. State of Affairs

States banning private companies from conducting business with the state is the new battlefront in the growing war around ESG. An acronym for environmental, social, and corporate governance, ESG has been at the fore of political battles as investments and business contracts receive significant attention from the public. West Virginia is not alone in its approach. Shortly after West Virginia’s decision, Texas comptroller Glenn Hegar said state government entities would not do business with ten financial firms that do not support oil and gas companies.[7] Together with Moore, the treasurers of Louisiana and Arkansas have pulled more than $700 million out of BlackRock over critiques of the firm's stance on environmental policies.[8]

This is not the first time states have boycotted private companies, but it appears to be the first time that states have taken a concerted effort to sever their relationship with major financial institutions over differing environmental policies. Historically, environmental reasons have not been a major factor in states refusing to do business with certain organizations. In the last several decades, states refusing to do business with private organizations have couched their decisions in human rights. In 2015, for example, in response to the Boycott, Divestment, and Sanctions movement (BDS), South Carolina passed a law that disqualified companies participating in boycotts against any of the state’s trading partners from receiving state contracts.[9] The bill’s primary sponsor, Alan Clemmons, claimed the anti-BDS law was, in part, an effort to curb anti-Semitism.[10]

Even amidst this landscape and historical trajectory, West Virginia’s decision stands out. Most financial firms and major American businesses have not endorsed BDS and therefore are not affected by anti-BDS laws. In contrast, West Virginia’s decision takes direct aim at the country’s most powerful financial firms.

III. Impact

The immediate impact of these states’ decisions is not immediately clear. But there appear to be four potential downstream effects. First, there is the risk of increased diversion between federal and state policy on environmental issues. Shortly before his election as president, Joe Biden told a group of voters, “I guarantee you. We’re going to end fossil fuel.”[11] With states beginning to target financial institutions that withdraw from supporting fossil fuels, there is the risk of a continued patchwork of policies towards climate change on the state and federal level.

Second, the decisions can potentially upend state budgets and lead to states losing hundreds of millions of dollars in contracts.[12] One academic study found that policies enacted by the state of Texas in response to ESG measures in 2021 would lead the state to paying hundreds of millions more in interest rates on municipal bonds.[13] The financial impact of the decisions like that of West Virginia’s is not yet clear, but cost to states is potentially high.

Third, the decision is likely to further politicize banking contracts. The former general counsel for the Kentucky treasurer told the New York Times, “I don’t like the idea that if you’re a Republican you have to bank with this company and if you’re a Democrat you have to bank with that company.”[14] Where the politicization starts depends on to whom you speak. Politicians that advocate decisions cutting ties with banks over ESG policies say that their responses are in response to banks politicizing their investments in the first place.[15]

Finally, there will likely be constitutional challenges to such decisions by states. Potential constitutional arguments that these laws are unconstitutional include (1) participation in political boycotts is protected First Amendment activity, and (2) governments cannot condition a contract for services on the relinquishing of First Amendment rights.[16] Whether constitutional litigation will ensue, and what arguments will be raised if so, remains to be seen.

[1] Erin K. Cho et al., To ESG or Not: “Damned If You Do; Damned If You Don’t,” at Least in Some US States, Mayer Brown (Aug. 29, 2022),

[2] Press Release, West Virginia State Treasury, Goldman Sachs Declares Preferred Stock Dividends (July 28, 2022),

[3] Id.

[4] Riley Moore (@RileyMooreWV), Twitter, (July 28, 2022), 11:55 AM),

[5] S.B. 262, 2022 Leg., Reg. Sess., (W. Va. 2022).

[6] David Benoit, West Virginia Penalizes Banks Including JPMorgan, Goldman for Coal ‘Boycotts’, Wall St. J. (July 28, 2022),

[7] Mitchell Ferman, Texas Bans Local, State Government Entities from Doing Business with Firms that “Boycott” Fossil Fuels, Tex. Trib. (Aug. 24, 2022),

[8] David Gelles, How Republicans Are ‘Weaponizing’ Public Office Against Climate Action, N.Y. Times (Aug. 5, 2022),

[9] First Amendment — Political Boycotts — South Carolina Disqualifies Companies Supporting BDS from Receiving State Contracts. — S.C. Code Ann. § 11-35-5300 (2015), 129 Harv. L. Rev. 2029, 2030-2032 (2015).

[10] Id.

[11] Steve Peoples, In Intimate Moment, Biden Vows to “End Fossil Fuel,” AP News (Sept. 6 , 2019).

[12] Supra note 6.

[13] Daniel Garrett and Ivan Ivanov, Gas, Guns and Governments: Financial Costs of Anti-ESG Policies (Working Paper Sept. 2, 2022),

[14] Supra note 8.

[15] Jordan Wolman, The State Treasurer Sticking it to Banks, Politico (Mar. 30, 2022).

[16] Supra note 9, at 2031.