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Over the past 18 months, Environmental, Social and Governance (ESG) agenda. It suffered setbacks in corporate DEI programs, declining investment dollars, and the collapse of the Net-Zero Insurance Alliance.
Just last month, major banks withdrew from net zero alliances Meta has been dismantled Many Diversity, Equity, and Inclusion (DEI) programs. It looks like environmental, social and governance (ESG) issues are not going to stick together. But don't be fooled.
A closer look at what the banks have said reveals that they are still full of unrepentant ESG financiers. Many of the changes announced are superficial or cosmetic and not indicative of a fundamental philosophical shift.
Diversity, equity and inclusion initiatives have been the subject of heated reviews of both praise and rebuke. (Adobe Stock)
Dozens of Fortune 500 companies (including… McDonald's and Walmart) represents trillions of dollars in market cap and millions of employees who rolled back or canceled their DEI programs in 2024. ESG-labeled mutual funds have bled cash over the past two years. The incoming administration has promised to phase out DEI in federal agencies.
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The Net-Zero insurance alliance collapsed with a mass exodus of insurers over the past year and a half when several state attorneys general expressed concern that participating in such an alliance might violate antitrust and anti-collusion laws. US states have withdrawn billions of dollars from Blackrock over environmental, social and governance concerns.
These changes are welcome correctives to the flawed and misguided ideological goals espoused by ESG advocates. The last dominoes to fall were the huge American financial institutions. Goldman SachsWells Fargo, Citigroup, Bank of America, and JPMorgan have all withdrawn from the Global Net Zero Banking Alliance.
Even BlackRock, which has been a strong advocate for ESG, has withdrawn from the Net Asset Managers Initiative. Although this may seem like a piece of ESG pushback, the cynicism is justified.
If you look at the press releases from these large financial institutions, you will find that they are unrepentant and still intend to achieve net zero goals. For example, Goldman stated: “Our priorities remain helping our customers achieve their sustainability goals and measuring and reporting on our progress.” Citigroup was more blunt: “We are committed to getting to net zero.”
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It was Black Rock The most frank is not to repent. “Our memberships in some of these organizations have caused confusion… and subjected us to legal inquiries… (but this) does not change the way we develop products and solutions for clients or how they manage their portfolios.” Translation: “We just want to distance ourselves from problematic PR, but we're not changing a single thing about how we do business.”
The moves by these large banks appear to mimic BlackRock CEO Larry Fink's strategy of not using the term “ESG” because it was a hot political topic, but remaining committed to “sustainability.” Blackrock continues to invest heavily in green infrastructure and renewable energy projects.
It's okay if their clients explicitly ask for such investments. But as American Airlines learned last week, pension fund managers have a fiduciary obligation to seek the best financial returns for their clients and can be held liable for using the funds they manage for other purposes.
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Despite the superficial progress that has been made as US financial institutions withdraw from destructive global alliances, they appear insincere when it comes to truly changing their ways. This should not be surprising given that the bank's staff has not changed much. We also see no evidence of a change in opinion when it comes to ESG criteria.
Instead, they appear to be concerned about public pressure and criticism from the government The next federal administration It is a state government official. Withdrawing from these alliances also gives them greater freedom to signal net-zero intentions without having to achieve them by a specific date.
But if ESG policy was fragmented and disruptive before, it remains so now. ESG ideological priorities detract from companies' ability to function well and benefit contractual stakeholders. Corporations have a hard enough time making a profit without pursuing various social justice priorities.
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Banks would do well to demonstrate their commitment to maximizing shareholder value and doing business with everyone. The pursuit of long-term profit success benefits shareholders, employees, suppliers and customers.
Most companies, especially unrepentant financiers, need to clean up the inside of their HR departments to focus on value creation rather than racial identity politics or costly virtue signaling on environmental and social issues. And as American Airlines case As is clear, companies that fail to do so may be violating their fiduciary duties to customers and shareholders.
