Republican Attack on Sustainability

The four leading U.S. financial firms bow to pressure from Trump’s party and scale back their environmental commitment.

After spending the last few years polishing their public image and pledging to use their financial muscle to combat climate change, some of Wall Street’s giants are backtracking on their environmental commitments amid a Republican Party crackdown on corporate sustainability practices.

Four of the leading U.S. financial firms (JPMorgan, BlackRock, State Street and Pimco), which manage trillions of dollars in assets, have announced they are dropping or reducing their involvement in Climate Action 100+, the largest initiative by investor groups to get the companies in which they are shareholders to reduce their polluting emissions. The managers of these funds justify this by arguing that U.S. law obliges them to look out for the financial interests of their clients rather than guide their decisions by other criteria, which would expose them to legal problems. Some Republican politicians have even accused these companies of embracing “woke capitalism,” the term they use to define anything that does not conform to their ideology.

While corporate and financial America has been proud of its commitment to sustainable investment criteria for years, taking into account environmental, social and corporate governance factors, this commitment may now penalize them politically. In fact, some Republican-governed states such as Texas and West Virginia,have vetoed government contracts with firms that support ESG criteria on the grounds that they threaten, among other things, the oil industry, which is fundamental to their economies. This has led to a growing trend for companies to avoid publicizing their green initiatives — known in jargon as greenhushing — translatable as ecological silence. A less sympathetic interpretation, however, suggests that the commitment of some of these large investors to the climate cause was not so strong in the first place, hence their backtracking when asked to take concrete action.

This adds to the growing gap between the U.S. and the European Union regarding climate regulation, with the added difference that European firms lack the financial power of Wall Street and, therefore, the ability to influence polluting companies as investors. The latest decisions taken by U.S. financial giants show that the anti-environmental lobby is a reality and that the fight against climate change could be another collateral victim of a possible Trump victory in the November presidential election. Sustainability may be driven underground in Trump’s United States.