Big banks have been steadily rolling back both their DEI and climate commitments since late last year, and the momentum shows no signs of stopping. During the last week of 2024, Morgan Stanely and Wells Fargo announced that they would withdraw from the United Nations Net Zero Banking Alliance against the backdrop of growing political unease with what Trump has labeled "climate cartels."

This follows on the heels of actions the big banks took earlier in 2024 to roll back diversity, equity, and inclusion (DEI) promises. Goldman Sachs was the first to quietly move away from their DEI commitments in January of 2024 and many of the world’s biggest banks soon followed.

Both the DEI and climate rollbacks are part of a larger societal and cultural trend that reflects significant shifts in political priorities, economic pressures, and public discourse. As we enter 2025, it's safe to assume we’ll see more of this kind of movement away from collective responsibility and commitments. This raises questions about how we got here, how effective ESG has been in fighting climate change and in corporate strategy, and what the path forward may look like under the new political regime.

During the quiet of the holidays, Morgan Stanley announced that it would be pulling out of the United Nation's Net-Zero Banking Alliance in the footsteps of Citibank and Bank of America's announcements earlier in the week. The Net-Zero Banking Alliance, or NZBA, has the stated goal to align banks' financing activities with the goal of reaching net-zero emissions by 2050.

The NZBA was a part of the larger Glasgow Financial Alliance for Net-Zero (GFANZ), which was launched by former Bank of England governor Mark Carney in 2021, according to the New Republic. GFANZ was a voluntary initiative that many banks joined to show how they were "greening up" their operations. As the New Republic points out, GFANZ originally touted "$130 trillion “relentlessly, ruthlessly focused on net zero,” but that figure referred to the total number of assets the groups that joined the GFANZ program commanded, “not actual dollars committed to reducing emissions; much of that $130 trillion was still heavily invested in fossil fuels, with few concrete plans to change course." As the story points out, many big banks saw it as a way to get good PR, but times have changed–particularly as Trump takes power in the US in just a few weeks.

While there are still 142 banks around the world that are still a part of the NZBA, there are only four banks in the US and only one major U.S. Bank: Chase. The Wall Street Journal has noted that it is likely that Chase will withdraw soon.

It's an unquestionably bad look for big banks, yet there are plenty of criticisms that can be made about Environmental, Social, and Governance (ESG) schemes, which gained prominence in 2004 when the UN released its “Who Cares, Wins” initiative, which encouraged companies to proactively incorporate ESG into capital markets. Prior to that, Socially Responsible Investing (SRI) came to the forefront, focused on aligning investments with an increased awareness of social values while encouraging investors to avoid industries like oil and tobacco.

A fundamental problem for ESG lies in the fact that there is a lack of standardization across industries, which lead to a hodgepodge of methodologies, assessments, and marketing terms making it incredibly difficult to understand just how successful these programs are. It was also challenging for investors to sort through the muck and figure out what would make a real climate impact, and what was just greenwashing.

While corporate lobbying and advertising are common strategies that businesses use to directly influence policy and consumer behavior ESG is different because it is based on integrating business concerns and broader social responsibility. In lobbying, there is a direct tit-for-tat exchange. In advertising the focus is on manipulating consumer behavior to drive sales, brand awareness and loyalty. ESG moves to maximize profit through (in some cases) virtue signaling rather than real impact, though some programs have done real good in the fight against climate change.

While it comes as almost no surprise that large companies are shirking their commitments, there’s a larger game at play: Politics and a culture shift here in the United States, namely Trumpism.

Within the Trump camp, there is (and has been) a steady drumbeat of anti-science, anti-DEI, and anti-climate change rhetoric. First, both DEI and climate initiatives fall under Environmental, Social, and Governance initiatives, known as ESG. The move against ESG has been driven by several factors, including punditry from conservative media that has framed these practices as elitist, expensive (to both stockholders and the public), and counter to "free-market" principles. Trump and his allies frequently frame environmental policies as an attack on fossil fuel industries and rural America itself, further exacerbating the cultural divide between environmental advocates and those who feel economically threatened.

That backlash has begun to spill over into laws currently on the books, putting even more pressure on companies to rescind their ESG promises further. Recently, states like Florida and Texas have enacted laws that target companies with ESG ties. In Texas, the state legislature has passed a law that “prohibits Texas state agencies from contracting with or investing in companies that "boycott" fossil fuels." It mandates the state divest from financial firms that avoid investments in oil and gas, aiming to "protect the state's energy sector" from ESG policies. In Florida, two bills are targeted at ESG; one, HB 3, prohibits state and local governments from considering ESG factors in investment decisions and contracting processes. The law requires that investment decisions be based solely on pecuniary factors, excluding environmental or social goals considerations. Governor DeSantis signed HB 3 into law in 2023. A second bill, HB 1645, which was signed into law in 2024, further restricts the incorporation of climate change and ESG factors in state policymaking, reflecting Florida's ongoing campaign to oppose the role of ESG considerations in governance.

Companies are also facing increasing lawsuits related to ESG. One suit, in particular, has segments of corporate America spooked: The suit led by the Republican Texas Attorney General, Ken Paxton, whcih targets BlackRock, Vanguard, and State Street for what the state (and ten other Republican-led states) allege is breaking antitrust law to drive up energy costs for consumers. As Bloomberg reported, the suit, filed in November last year, alleges that the three money managers “combined their market clout and membership in climate groups to pressure coal producers to cut output,” resulting in higher prices for Texans. In response, BlackRock told Bloomberg in a statement that the lawsuit “undermines Texas’ pro-business reputation” and added that “the suggestion that BlackRock invested money in companies with the goal of harming those companies is baseless and defies common sense.”

The three-pronged campaign in law, media and politics to end ESG, plus the fact that many of these groups, like the NZBA and GFANZ, are strictly voluntary, makes it easy to understand why the big American banks are backing out of their climate commitments. While some argue that big corporations remain committed to mitigating climate change, just in a much quieter way, (a tactic called "greenhushing"), it remains to be seen if these huge banks will actually make any measurable impact on climate change now that they don't have a public-facing promise to uphold.

A recent piece in Bloomberg argued that it makes a sense for companies to go it alone in the fight against climate change, as Adam Matthews told the outlet, ““The era of big alliances was about indicating a commitment to climate goals; but now it’s time to roll up sleeves and move on from vague and highfalutin pledges and start demonstrating what they mean for capital allocations and investment decision-making,” Matthews said. “This can be done equally well individually as it can collectively.”

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