How Republican-led states are targeting Wall Street with anti-woke laws

WASHINGTON, July 6 (Reuters) – Republican-led states have unleashed political pressure to punish Wall Street for taking positions on gun control, climate change, diversity and other social issues, as a warning to companies that have meddled in social unrest debates.

Abortion rights are about to be the next frontier.

There are at least 44 bills or new laws in 17 conservative-led states punishing such company policies this year, compared with roughly a dozen such measures in 2021, according to a Reuters analysis of state legislative agendas, public documents and statements.

While some of the individual moves have been reported, the scale and speed with which such “anti-woke” state laws and policies are being blown up, and the challenges they pose for Wall Street firms, are detailed here for the first time.

The Merriam-Webster dictionary defines “woke” as awareness and active attention to issues of racial and social justice, but it is often used by conservatives to disparage progressive policies. The term has gained popularity as America has become more politically polarized on issues from racial justice and LGBTQ rights to the environment and COVID-19 vaccines.

Reuters counted bills considered and state laws passed in 2021 and 2022, although some state officials are also using executive powers to punish Wall Street.

The growing restrictions show how America’s culture wars are creating new risks for some of America’s best-known companies, forcing them to balance pressure from workers and investors to take positions on hot-button issues with a potential backlash from conservative politicians.

West Virginia and Arkansas this year, for example, stopped using BlackRock Inc ( BLK.N ) for certain services because of its climate stance, according to West Virginia Republican Treasurer Riley Moore and Arkansas media reports.

In Texas, JPMorgan Chase & Co ( JPM.N ), Bank of America ( BAC.N ) and Goldman Sachs ( GS.N ) were forced out of the municipal bond market because of laws passed last year banning firms that “boycott” energy companies or “discriminate” against the arms industry from doing new business with the state.

In many cases, the measures target a number of companies, limiting their ability to conduct state business. But financial institutions have been a prime target because of the central role they play in the economy and the early positions many have taken on issues such as fossil fuel and firearms financing.

Republicans say the policies of such companies deprive legitimate businesses of capital.

“They use the power of their capital to push their ideas and their ideology on the rest of us,” Moore said. He spearheaded a law passed in March denying business to banks that “boycott” fossil fuel companies and rallied officials from 16 other countries to pledge to adopt similar policies. read more

With several major financial firms stepping in to cover travel expenses for employees seeking abortions after the Supreme Court last month struck down federal abortion rights, Republican pressure to sanction Wall Street for “woke” positions is likely to grow. Read more

Texas Republican lawmaker Briscoe Kaine said he plans legislation to ban such coverage and bar companies that provide it from receiving business or contracts from the state of Texas.

“No corporation doing business in Texas will be allowed to subsidize abortions or abortion travel in any way,” Cain said in an email to Reuters.

NO BOYCOTTS

The new restrictions will make it harder for financial firms to carry out a range of government activities, from underwriting bonds to managing state funds, deposit accounts and government credit cards, according to interviews with more than a dozen industry sources, bank lobbyists and lawyers.

Such contracts can be worth several million dollars each, procurement data show.

JPMorgan, for example, underwrote $3.2 billion in Texas muni bonds last year, compared with $210 million so far this year, Refinitiv data showed. Bank of America, which committed $3.7 billion in Texas muni bonds last year, has done nothing this year.

Some smaller firms, including Ramirez & Co Inc and Loop Capital Markets, meanwhile, have jumped more than 10 places so far this year in the bookrunner’s ranking of the Texas bond market based on deal value.

Of course, some Democratic-led states are also looking to tip the scales. Washington state has launched a “climate resilience fee” for institutions that finance fossil fuel projects. California is considering a bill that would stop its pension plans, the nation’s largest, from investing in fossil fuel companies.

But Democratic-led states are not pursuing as many punitive measures, according to the review and the sources.

“We’re going to see a lot more of these laws on one side or the other,” said John Crossley, a partner at K&L Gates who focuses on energy. “It’s going to make it increasingly difficult for people to work in these markets.”

Spokespeople for the above financial firms declined to comment or did not respond to requests for comment.

Financial firms say they aim to provide comprehensive healthcare benefits. They also argue that government restrictions will increase costs for Americans and dispute the characterization of their policies as boycotts.

BlackRock, the world’s largest asset manager and a frequent target of Republican attacks, for example, told Texas officials that while it has joined various efforts to reduce greenhouse gas emissions, it supports fossil fuel companies. Read more

“The economy and the financial system are best served when banks of all sizes can make their own banking and lending decisions about how to meet the needs of their communities based on their business model and risk tolerance,” said Joseph Pigg , senior vice president of the American Bankers Association.

ANTI-SABBATH SMOKE

The review shows that anti-woke measures are gaining ground not only in traditional conservative bastions like Texas and Kentucky, but also in so-called purple states — whose voters choose Democrats or Republicans — like Arizona and Ohio.

The problems targeted by these measures are also springing up like mushrooms.

Guns and energy were the focus of about a dozen state laws and bills last year and at least 30 legislative measures this year.

But this year there were also more than a dozen bills related to social and other issues, including “divisive concepts” such as critical race theory — an academic theory that says racial bias is written into U.S. laws and institutions — mandatory vaccines against COVID-19 or the use of “social credit ratings,” the Reuters analysis shows.

The latter is a theory that companies can take into account an individual’s political leanings when providing and pricing services.

In April, for example, Florida banned companies from requiring training that could make staff feel “guilt” or “distress” because of past actions by members of the same race. In unveiling the bill, Florida Gov. Ron DeSantis singled out Bank of America as a company conducting such “woke” training.

A spokesman for the bank said the materials were offered to hundreds of companies by a not-for-profit organization and were not part of the bank’s training materials.

Although the revised measures do not target corporate abortion policies, Kaine said he expects other Republican-led states to impose business restrictions on companies with such policies.

DEPARTMENTS OF WALL STREET

The financial industry is scrambling to fend off the attack, the sources said. Its trade groups are registered mainly to lobby the federal government, while state-based groups are not always aligned with the priorities of Wall Street companies.

Moore, for example, said West Virginia’s community banks support his measures. The West Virginia Bankers Association declined to comment. The Texas Bankers Association said the group did not oppose the restrictions in Texas because its members were not in “consensus.”

Wall Street’s opponents, on the other hand, are united.

Fueled by what they say are efforts by Democrats in the federal government to push “woke” policies, oil and gas, firearms and conservative groups including the Texas Public Policy Foundation and the National Shooting Sports Foundation (NSSF) have successfully pushed such restrictions, according to industry sources and advocates. Read more

“Banks should stay out of policy choices,” said Lawrence Keen, general counsel at NSSF, which advocated for the Texas law targeting lenders’ firearms policies.

The American Petroleum Institute, a major energy group, said it opposes discriminatory policies against the industry.

Jason Isaacs, a former Texas lawmaker who leads energy advocacy for the Texas Public Policy Foundation and helped craft Texas’ fossil fuel law, said he is discussing similar laws with other states, adding, “This woke political ideology will continue , unless we get her under control.”

Reporting by Pete Schroeder in Washington Additional reporting by Chris Prentice in Washington and Ross Kerber in Boston Editing by Michelle Price, Paritosh Bansal and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.