Final nail in the coffin for ESG

OPINION:

The year kicked off with quite a political bang for conservatives. That bang has been the hammering of the final nail in the coffin for environmental, social and governance efforts by big U.S. banks and financial services companies.

In the first weeks of 2025, six of the biggest banks have made waves by quitting some of the largest global net zero target-setting groups. J.P. Morgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs all dropped out of the Net Zero Banking Alliance. Most recently — and potentially most notably, given Larry Fink being such a vocal supporter of ESG in the past — BlackRock has retreated from the Net Zero Asset Managers initiative (NZAMI). BlackRock stated that its membership in the group “caused confusion regarding BlackRock’s practices and subjected [them] to legal inquiries from various public officials.”

This is both a smart business decision and the correct one for a company with a fiduciary duty to provide the best possible returns for its customers. A recently released House Judiciary Committee report indicated the world’s largest financial institutions “colluded through climate alliances and initiatives” to replace Exxon Mobil Corp.’s board members after they refused to commit to climate pledges. The group most specifically cited in that report was Climate Action 100+, of which more than 70 investors — including most major U.S. asset managers — have left since that report was published.

Recognizing the significance of these banks and asset managers dropping these climate groups and commitments, Texas Attorney General Ken Paxton recently dropped his longtime review of several of them.

In 2023, Mr. Paxton’s office announced a review of companies that were Net Zero Banking Alliance members, threatening to bar them from municipal bond deals in Texas. This was largely instigated by the state’s 2021 legislation to punish financial firms accused of engaging in boycotts of oil and gas or gun manufacturers. But following the retreat from these climate groups, Mr. Paxton announced the end of its reviews of Wells Fargo, Bank of America, Morgan Stanley and J.P. Morgan — major underwriters of state and local debt in Texas. The continued retreat from other climate organizations asks whether it will be enough for Mr. Paxton to drop his lawsuit against BlackRock, State Street and Vanguard for alleged antitrust violations by “boosting electricity prices through their investments.”

In further recognition that these financial institutions’ finally dropping out of climate groups is a win for the state’s oil and gas industry, the comptroller of Texas, Glenn Hegar, announced he would review whether BlackRock’s move to run away from the NZAMI climate cartel is enough to take it off his list of entities that boycott one of the state’s key industries.

Similarly, legislation has been passed in other states nationwide over the past few years that forced asset managers and banks to focus solely on fiduciary duty and returns rather than environmental or social goals. Studies have continued to prove that ESG investments do not provide the best returns and don’t make much of a difference in companies’ actual ESG performances. Nonetheless, the efforts from state leaders seem to have finally gotten through to these companies, which are now choosing to exit these climate groups.

This accomplishment has shown what can be done when Republicans band together behind the facts. American investments are better off in funds that will produce the best returns, with no group scheming about funding ESG efforts. The FDIC scored a huge win recently, with Vanguard entering into a passivity agreement, ensuring the company does not continue to influence the policies of covered institutions they have investments in, which was a major vehicle for pro-ESG pressure.

The ESG movement is on the decline. These institutions are backing away from publicly aligning their investments with ESG goals, and now is the time to hold them to it. We cannot allow companies like BlackRock and J.P. Morgan to continue their activist investing secretly. Congress, state attorneys general and state treasurers should keep up the pressure to eradicate it for good.

• Aiden Buzzetti is the president of the Bull Moose Project.