This shift is striking, given that around 2020, the financial sector positioned itself as a champion of the climate. At the time, BlackRock CEO Larry Fink advocated for a fundamental reform towards investing with a focus on environmental, social and governance (ESG) factors. It seemed to be becoming a mainstream investment strategy. Major banks promised to bring their lending practices in line with the Paris Climate Agreement. The Net Zero Bankers Alliance, founded during the COP26 climate summit in 2021, wanted to stop financing new CO2 emissions by 2050, although in practice this remained an intention without consequences.
At the same time, a strong market for sustainable investment products emerged, which pension funds and institutional investors were expressly calling for. ESG was therefore not only a strategic positioning, but also a commercially attractive segment.
Legislation against ESG
However, Republican politicians and conservative interest groups in the US argued that financial institutions should be less involved in social issues. Several US states withdrew public funds from investments with asset managers. They even introduced legislation targeting ESG strategies. There was also growing attention to legal risks surrounding competition rules and the fiduciary duty of listed companies (the duty to act in the interests of shareholders).
After Donald Trump’s re-election in 2024, all major American banks withdrew from the Net-Zero Banking Alliance, causing the organisation to disband. Other climate initiatives were also suspended or reconsidered. Some institutions relaxed their restrictions on financing fossil fuel projects and reduced their support for shareholder climate resolutions.
References to climate and sustainability now seem to be out of fashion; they declined sharply in quarterly updates over the past year. Climate targets are no longer part of strategic profiling; the emphasis is now on financial performance, security of supply and risk mitigation. The energy transition remains an area for investment, but is being approached with a clearly more business-like assessment and less pronounced ambitions than a few years ago.
Read the full article in the New York Times
Image: Erman Gunes/Shutterstock
