Three muni bond underwriters dodge ESG blacklist in Louisiana

The public finance desk at Wells Fargo & Co., Bank of America Corp., JPMorgan Chase & Co. and other Wall Street banks just sidestepped a potential ESG fight in Louisiana.

In a quick meeting that lasted less than 10 minutes on Thursday, members of the state's bond commission approved the firms as part of a group of managers that the state can hire on debt deals. The underwriting pool lasts until 2027.

The officials did so despite misgivings about the banks' climate change commitments as members of the Net-Zero Banking Alliance — an organization that is a frequent target for Republican politicians over pushback on environmental, social and governance policies. 

There is also a new law in Louisiana that restricts work with companies that "discriminate" against firearm entities or trade groups. The legislation is similar to a Texas law that has whipsawed banks' public finance businesses in the state.

It's the latest salvo in a long-fought fight between banks and Republican politicians who say ESG policies go against their party's beliefs. Louisiana has targeted large Wall Street banks over their positions on guns and fossil fuels before, barring Bank of America from managing a state bond deal in 2018. 

Republican State Treasurer John Fleming said he had concerns about big banks limiting business with firearms entities and Christian organizations. However, he acknowledged that it is difficult to restrict business with the biggest firms.

"We have to balance that with the reality that virtually all of the big banks are a member of the Net Zero Alliance," he said at the meeting. "Only a small number, relatively speaking, of banks actually qualify to do the level of business that a state treasurer requires."

A spokesperson for Bank of America declined to comment. Spokespeople for Wells Fargo and JPMorgan didn't provide a comment. 

State officials considered underwriters' responses to a request for qualifications for underwriting services earlier this year.   

The attorney general's office asked banks about their energy policies, according to Chief Deputy Attorney General Larry Frieman, who spoke at the meeting. 

"We do recommend proceeding under a yellow caution flag," he said. "We will continue to do our due diligence and evaluate and monitor the companies' behavior and report to the commission any adverse findings we discover in the future." 

Louisiana also hired Wells Fargo as senior managing underwriter of a ­tender transaction of gasoline and fuels bonds.