State Attorneys General Fire Back at California's Attempt to Mandate Divestment

Earlier this year, California Insurance Commissioner Dave Jones unveiled the Climate Risk Carbon Initiative, a searchable database of “detailed financial data about the level and types of carbon-based investments held by all insurance companies that write $100 million or more in premiums nationally.”

This was the latest salvo in Jones’ relentless crusade to coerce the nation’s leading insurance companies to divest from oil and natural gas company holdings.

This week, a dozen state attorneys general and one governor fired back … hard.

In a letter to Jones dated June 19, 2017, Oklahoma Attorney General Mike Hunter described the Carbon Risk Carbon Initiative as “misguided as a matter of policy, questionable as a matter of law, and inconsistent with the principle of comity among the United States.”

In his letter—which was signed by attorneys general from Alabama, Arkansas, Indiana, Louisiana, Missouri, Montana, North Dakota, Texas, Utah, West Virginia and Wyoming, as well as Gov. Matt Bevin of Kentucky—Hunter said that Jones’ effort to force divestment would actually “hurt the financial well-being of carriers instead of helping them” because “rapid and premature divestment from bonds may cause insurance carriers to incur significant losses.”

And it’s not just the insurance companies that will suffer. “It is our responsibility to protect the interests of … the many energy businesses, their employees, and their customers who are the targets of your attempt at public shaming,” he wrote.

He added that, “it is also our role to protect the public from misleading, alarmist, and fiscally irresponsible information, including deeming investments in fossil fuels as likely ‘stranded assets.’ Such hyperbolic and inflammatory language can only be aimed at hurting that sector of the economy responsible for providing American citizens with reliable energy resources.”

Saying Jones had “little evidence” that fossil fuels pose unusually high risks for investors, Hunter surmised that “your efforts therefore appears to be directed at using your office to attack businesses that you do not regulate—such as energy companies—rather than to protect the public from risks in the insurance industry.”

“Your predictions about how regulation would affect the market,” he wrote, “only demonstrate the folly of insurance regulators attempting to issue investment dictates to professional investors.”

Hunter also pointed out Jones’ hypocrisy in singling out investments in oil and natural gas as risky while ignoring “renewable energy companies that may actually present greater financial risk to insurance carriers.”

“Nearly a hundred solar companies have failed or gone bankrupt in recent years (e.g. Solyndra, SunEdison, SolarWorld, Suniva) … yet your office expressed no concern about these actual risks solar companies pose to the insurance industry.”

After shredding any rationale for Jones’ politically motivated campaign against the oil and gas industries in his must-read 1,300-word letter, Hunter threw down the gauntlet:

Your call for divestment and attempt to publicly shame those who invest in American energy appears to be driven by politics unrelated to insurance regulation, animus towards the fossil fuel industry and those that depend on it, and a desire to discriminate against those who transact in commerce that mostly takes place outside your state …

We implore you to carefully consider these legal risks, the harm that you are doing to the insurance and energy industry in other states, and the lack of any real benefit to the insurance market in California. If you continue to call for divestment and require discriminatory disclosures of fossil fuel investments, we will be forced to consider the legal avenues of relief available to protect our insurance carriers, energy producers, and consumers.

Your move, Mr. Jones.