Did they jump or were they pushed?

Mar 14, 2023 View in browser   By Jordan Wolman and Debra Kahn THE BIG IDEA Riley Moore is leading the anti-ESG charge. | Photo Courtesy of West Virginia State Treasury DISPROVING MOORE'S LAW — Red-state regulators have the financial sector on the defensive over ESG, but they may be overstating their success in bending Wall Street to their will. West Virginia is one of Republicans' main fronts in their war against so-called "woke" investing. Its 2022 law made it the first state to blacklist financial services companies over alleged discrimination against the fossil fuel sector. While West Virginia Treasurer Riley Moore used the law to kick out Wall Street giants, including BlackRock and Goldman Sachs, he said its highest value was in nudging banks to drop their anti-fossil fuel positions — specifically, getting U.S. Bank to go back on its policy to stop financing coal-fired power plants. Moore said U.S. Bank's about-face was "the most important point" of the effort. (West Virginia is the country's No. 2 top coal producer.) But it turns out U.S. Bank — the nation’s fifth-largest commercial bank — had already adjusted its coal stance, months before the law took effect in June 2022, according to documents obtained by the investigative group Documented. The bank updated its environmental and social risk policy statement in December 2021 to delete a ban on participating in the development of new coal mines. (It kept coal, metals mining, oil and gas on a list of sectors requiring increased “due diligence,” though.) Moore, who is running for Congress in 2024, implied that U.S. Bank changed its policy because of the threat of being on the boycott list. He removed the company from his initial list after a June 2022 meeting with bank officials and an official written response in July. “That is a win,” he said of the bank’s changed position. His victory lap resonated with other state officials. The State Financial Officers Foundation, an influential anti-ESG group, credited Moore with U.S. Bank having "stepped up and [done] what was right.” The law also spurred copycat bills in Wyoming and North Dakota this year (both of which failed to advance). But the timeline is muddy around what many anti-ESG advocates see as their biggest concrete victory. A spokesperson for U.S. Bank pushed back on any assertion the bank changed its policy as a result of West Virginia’s law. Lee Henderson said the policy change came as a result of a “comprehensive risk management process” that aims to “operate in the best interests of our employees, customers and communities, while seeking to maximize long-term shareholder value.” Moore's office said the bill had been in the works since mid-2021, so banks had plenty of warning. "[T]he fact this legislation was coming down the pike was telegraphed for quite some time in advance of its ultimate introduction," spokesperson Jared Hunt said in an email. "That’s why Treasurer Moore feels confident our legislation played a part in banks reconsidering fossil fuel capital decisions." West Virginia remains on the anti-ESG prowl. Last week, state lawmakers sent Republican Gov. Jim Justice a bill that would require the state investment management board to consider only "pecuniary interests" when taking shareholder votes — which would exclude ESG factors, unless a "prudent investor" would deem them material.   DOWNLOAD THE POLITICO MOBILE APP: Stay up to speed with the newly updated POLITICO mobile app, featuring timely political news, insights and analysis from the best journalists in the business. The sleek and navigable design offers a convenient way to access POLITICO's scoops and groundbreaking reporting. Don’t miss out on the app you can rely on for the news you need, reimagined. DOWNLOAD FOR iOS– DOWNLOAD FOR ANDROID.     Sustainable Finance SVB SHOCKWAVES — The collapse of one of the tech industry's biggest lenders has climate tech companies on edge, Corbin Hiar and Avery Ellfeldt report for POLITICO's E&E News. Silicon Valley Bank's insolvency is creating a hole in the tech startup ecosystem. Sunrun Inc., the nation’s biggest residential solar company, had a $1.8 billion lending deal with SVB. The company hadn’t tapped $710 million of that sum. Other customers are also now missing lines of credit they could draw on to bridge fundraising rounds or as a form of insurance. “I’ve had over a dozen founders reach out to me and say, 'Hey, is this something that you guys can help with as well, because now we need to find a new source for this?'” said Dimitry Gershenson, the CEO of Enduring Planet, a lender to climate startups that doesn’t currently offer credit lines to companies. Companies are also worried the financial industry might respond to the collapse by further tightening lending standards for startups. “What we experienced was the failure of a badly managed company: Silicon Valley Bank,” said Ethan Cohen-Cole, a former economist at the Federal Reserve Bank of Boston who now leads the direct air capture startup Capture6. “If the reaction in the industry is instead that this is a systemic problem, that’s going to have a much larger, much more pernicious impact on climate tech.” BUILDING BLOCKS WASTE NOT WANT RECYCLING — An ambitious bill in Washington state to boost recycling rates failed to advance last week after a successful push from the state’s powerful waste-hauling industry. The proposal would have forced packaging and paper producers to pay into a recycling system and establish post-consumer recycled content requirements and bottle-recycling targets. A similar bill also failed last year. Washington would have become the fifth state to enact an extended producer responsibility program, or EPR. The Washington Refuse and Recycling Association fought the bill, as did individual haulers like Waste Management and Republic Services, which testified against it in a legislative hearing. “The waste industry was able to prevail,” said Heather Trimmer, executive director of Zero Waste Washington, one of the environmental groups backing the bill. WRRA didn't respond to requests for comment. Democratic State Rep. Liz Berry, the bill sponsor, said in an interview that she might consider separating the different parts of the bill into individual measures next session. New York, Maryland, Illinois and Hawaii are also considering EPR bills this year. SPEEDY RELIEF — A New York City nonprofit is testing a novel insurance model to get money to flood-hit households more quickly, Tom Frank reports for POLITICO's E&E News. The Center for NYC Neighborhoods is buying a policy from Swiss Re that will pay out depending on the amount of flooding — not the amount of property damage. The more flooding, the bigger the insurance payment, up to the $1.1 million policy limit. The center will solicit applications from needy households in flooded areas. After applications are received, the center will give each household an identical amount of money from the insurance claim, up to $15,000. It only covers flooding from rain, rather than coastal flooding, and is intended to pay out faster than FEMA or private insurance. “This is a very new and innovative financial tool that has never been tested in this way,” said Theodora Makris, the center’s program manager. YOU TELL US GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. We deliver data-driven storytelling, compelling interviews with industry and political leaders, and news Tuesday through Friday to keep you in the loop on sustainability. Team Sustainability is editor Greg Mott, deputy editor Debra Kahn and reporters Jordan Wolman and Allison Prang. Reach us all at gmott@politico.com, dkahn@politico.com, jwolman@politico.com and aprang@politico.com. Want more? Don’t we all. Sign up for the Long Game. Four days a week and still free! WHAT WE'RE CLICKING — Coconut husks are finding traction as a shoreline-protecting material around the world. — The melting Arctic is interfering with military training. — Insurers need to figure out how to keep writing policies in risky areas.   LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today.       Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Jordan Wolman @jordanwolman Allison Prang @AllisonPrang   Follow us

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