Contrary to recent reports, woke is not yet broke on Wall Street, at least when it comes to the all-important sustainability problem of climate change. While many financial firms have adopted a lower profile around environmental, social, and governance policies of late, this is mainly a tactical retreat rather than a capitulation on the net-zero agenda.
In the latest example, over the past few weeks, the six largest U.S. banks have exited the Net-Zero Banking Alliance, while BlackRock, the largest investment management firm in the world, quietly left the Net Zero Asset Managers initiative. Members of both climate coalitions commit to aligning their lending and investment activities with net-zero greenhouse gas emissions by 2050, which necessarily means cutting off financing to traditional energy companies.
The exodus from these emissions-hating associations has accelerated since 2022, leaving these groups in complete disarray. The Net-Zero Insurance Alliance disbanded in 2024, while the NZAM suspended operations shortly after BlackRock left the building. No major U.S. energy lending bank currently remains in the NZBA.
Hold the anti-ESG applause just yet.
All the financial institutions now leaving these climate alliances posthaste are doing so mainly to reduce their legal exposure, both to red state investigations into financial discrimination against oil, gas, and coal companies and possible antitrust charges given the coordinated anti-competitive behavior that these groups engage in.
While rescinding their net-zero club memberships, none of these financial firms are backing away from their net-zero promises. Going forward, these institutions will continue to shoot at the same climate targets while nominally acting independently. For example, Morgan Stanley has publicly reiterated its commitment to "real-economy decarbonization," with no change to its previously established 2030 interim financed emissions targets.
Net-zero alliances may be fading away, but the United Nations-backed climate advocacy groups sponsoring them are not going anywhere. Organizations such as the Principles for Responsible Investment (5,293 signatories), the United Nations Environment Programme Finance Initiative (558 members), and the United Nations Global Compact (1,707 finance industry participants) are the real muscle behind ESG on Wall Street. None of these virtue-signaling official-sounding outfits are seeing their membership rolls drop.
With ESG still fully entrenched across the U.S. financial markets, red states such as Texas, which have been leading the anti-ESG charge in recent years, should not be standing down at this point. Yet surprisingly, that is what is happening.
In response to the NZBA departures, Texas Attorney General Ken Paxton announced that his office was closing out its outstanding legal reviews of all the major U.S. banks under the state's Senate Bill 13, which prohibits Texas government entities from doing business with financial institutions that boycott the oil and gas sector. If only the Lone Star State were more like the Show Me State when it comes to energy, climate, and ESG.
It is way too early for Texas to declare victory on the ESG front and drop its bank investigations, especially given that the banking sector is the linchpin of the fossil fuel defunding strategy of sustainability activists. Paxton should continue with his investigations to expose all the ESG players behind these net-zero affinity groups and the behind-the-scenes workings of their climate-driven agenda and to shed some much-needed light on the relentless financial harassment of the traditional energy industry. Such legal discovery would be therapeutic for the financial markets and enlightening (if not emboldening) for Republican lawmakers.
One of the basic tenets of the sustainability movement is that it requires conspicuous conformity. Financial institutions must demonstrate ESG leadership by recording and reporting all their corporate engagements, including follow-up actions and escalation plans, to prove their value-added and show how they are driving positive ESG outcomes. Documentation is key because ESG is basically a massive surveillance state where Big Brother organizations such as the PRI, the UNEP FI, and the UNGC are always watching.
THE DEI LEGAL RECKONING HAS ARRIVED
As a result, there is an extensive paper trail out there of all the regular engagement meetings between capital providers and energy companies and between financial firms and outside activist groups showing the ESG pressure tactics being used to strike backroom climate deals.
The legal sights of the anti-ESG effort must remain trained on the third-party actors behind the net-zero market push and the climate collusion intrinsic to the sustainability movement. Red states such as Texas should continue to lead in defending the domestic energy industry against financial discrimination and not leave it to the second Trump administration to finish the ESG job for them.
Paul Tice is a senior fellow at the National Center for Energy Analytics and author of The Race to Zero: How ESG Investing Will Crater the Global Financial System.