Dive Brief:
- The Louisiana Bond Commission approved a slate of banks as debt underwriters, including members of the Net-Zero Banking Alliance, at a Thursday special meeting, despite the state enacting an anti-ESG law in June.
- The decision to proceed with NZBA members as debt underwriters came after Larry Frieman, the chief deputy attorney general for the state’s Executive Division, said in the Aug. 8 meeting that an analysis and due diligence of those companies revealed no “red flags that would result in a recommendation to exclude any company from the list.” Bank of America, JPMorgan Chase and Morgan Stanley were among the approved NZBA members.
- Louisiana passed and enacted a law this year restricting the state from working with companies who “discriminate against firearm and ammunition industries,” similar to a 2021 Texas law. The bond commission and the former state treasurer had excluded certain banks from the state’s favored banks list, municipal bond offerings and underwriting over their gun sales policies in the past.
Dive Insight:
The special meeting — separate from the bond commission’s regularly scheduled monthly meetings — was called to review the recommendations for investment banks for the state to utilize as underwriters, including those which would underwrite bonds funded by the state’s gasoline and fuel tax. The first pool creates a bank of underwriters for the state to use for negotiated transactions through 2027.
The evaluation teams picked the top-nine ranked investment banks, of 26 submissions, for the underwriter pool to be used as senior manager and co-manager underwriters. That group includes NZBA members Wells Fargo, Morgan Stanley, JPMorgan Chase, Bank of America, TD Securities and Barclays, as well as Florida-based Raymond James, Chicago-based Loop Capital Markets and Charlotte-based Truist.
Despite being approved to the bank of underwriters on standby, none of the included banks are guaranteed a transaction, and the commission reserved the right to use a competitive bidding process or other financing vehicles.
Wells Fargo was chosen and approved as the senior managing underwriter and the dealer manager for the Gas & Fuels Tax Tender. Morgan Stanley was chosen as a co-manager, alongside Oppenheimer Holding and Blaylock Van.
Frieman said, as counsel for the bond commission, his office sent letters to all of the NZBA member companies, questioning their policies on fossil fuel industries. While Frieman said none of the responses raised red flags, his office recommended “proceeding forward with caution.”
“All the companies canvassed are members of the net zero banking alliance, but then said in their answers that they do not have any policies that discriminate against the fossil fuel industries,” Frieman said. “While these responses are inconsistent, we do recommend proceeding under a yellow caution flag while we will continue to do our due diligence and evaluate and monitor the company's behavior.”
In total, the meeting lasted less than 10 minutes. Louisiana State Treasurer John Fleming, a Republican, said he approved of the slate despite sharing concerns about some of the banks’ NZBA involvement, firearms policies or other decisions “based on their political views.”
“We too have been very concerned about this,” Fleming said Thursday. “We have to balance that with the reality that virtually all of the big banks are members of the Net-Zero Alliance, and we have the practicalities of only a small number, relatively speaking, of banks actually qualified to do the level of business that a State Treasurer requires.”
Former Louisiana State Treasurer John Schroder had excluded CitiGroup and Bank of America from a municipal bond offering in 2018 over their firearms stances. Citi was also excluded from the state bond commission’s favored banks list in 2020, with allegations that the process was designed to specifically exclude Citi.
Louisiana Attorney General Jeff Landry, a Republican, also issued legal advice for the state retirement boards to divest from BlackRock, which Schroder followed through on by divesting nearly $800 million the state had invested with the firm.
