Curtis Tate Published

Law Will Allow State To Boycott Banks That Shun Fossil Fuels

A Wells Fargo Bank branch office in San Francisco. The bank acknowledges it signed up nearly 500,000 auto-loan customers for insurance they didn't need.
Wells Fargo is among many financial institutions that have made climate change part of their business model.
Justin Sullivan/Getty Images

The state legislature passed a bill that seeks to punish banks that refuse to finance fossil fuel companies.

SB 262, which takes effect in June, will enable the state treasurer to block West Virginia from doing business with financial institutions that boycott fossil fuels.

The treasurer’s office will compile a list of banks that meet the criteria. The law authorizes the treasurer to refuse to consider such institutions for contracts with the state.

There are loopholes, though. First, the state’s Investment Management Board is exempt. The board manages billions of dollars of state taxpayer funds.

Second, it allows banks to limit their exposure to fossil fuels for reasonable business purposes. That includes managing risk, limiting liability and complying with laws and regulations.

Most financial institutions already do that. Further, many have policies that encourage investment in greener sources of energy or a commitment to achieve a net-zero carbon impact. As in other sectors, climate change has become part of the business model in banking.

It isn’t clear which financial institutions could be affected by West Virginia’s new law.

Kentucky lawmakers enacted a similar law this year.