Wall Street is paring its bets on ESG and DEI as political pressure rises

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Big businesses keep backing away from "ESG" and "DEI" as the political heat around these buzzwords mount in an election year.

Companies are reducing their involvement in a high-profile climate group; talking less about environmental, social, and governance (ESG) concerns on earnings calls; and paring back new hires devoted to diversity, equity, and inclusion (DEI) in workplaces.

The latest retrenchment came last week when financial giants JPMorgan Chase (JPM), State Street (STT), and Pimco all pulled out of Climate Action 100+, a coalition formed in 2017 to encourage companies to reduce their emissions.

BlackRock (BLK), the world's largest money manager, also ended its US involvement with the group.

MANHATTAN, NEW YORK, UNITED STATES - 2023/09/14: Marquee at the main entrance to JPMorgan Chase headquarters building in Manhattan. (Photo by Erik McGregor/LightRocket via Getty Images)
The main entrance to JPMorgan Chase's headquarters in Manhattan. (Erik McGregor/LightRocket via Getty Images) · Erik McGregor via Getty Images

A JPMorgan asset management spokesperson explained the decision partly as a result of the firm's "development of its own climate risk engagement framework over the past couple of years," adding that "we believe that climate change continues to present material economic risks and opportunities to our clients."

The asset managers "are delivering what their clients want," wrote Doug Holtz-Eakin, the president of the American Action Forum, in a recent column.

The moves followed a wave of political pressure on the climate coalition, with House Judiciary Committee Chair Jim Jordan (R-Ohio) even issuing a subpoena.

In a statement, Jordan called the withdrawals "big wins for freedom and the American economy, and we hope more financial institutions follow suit in abandoning collusive ESG actions."

The GOP is applying pressure on other fronts, as well. Former President Trump has promised to banish ESG "forever," while a top Trump ally has called DEI "bigotry." Republican-led states are also aggressively pushing companies to revisit their DEI policies and suggesting they could be illegal.

WASHINGTON - JANUARY 17: Rep. Jim Jordan, R-Ohio, arrives for the House Repubican Conference caucus meeting in the U.S. Capitol on Wednesday, January 17, 2024. (Bill Clark/CQ-Roll Call, Inc via Getty Images)
Rep. Jim Jordan (R-Ohio) at the US Capitol in January. (Bill Clark/CQ-Roll Call, Inc via Getty Images) · Bill Clark via Getty Images

A shift on multiple fronts

Companies are shying away from ESG and DEI in other ways. One has to do with what they discuss on their quarterly earnings calls with analysts.

A recent analysis from FactSet found that mentions of ESG on S&P 500 earnings calls were set to reach new lows this year compared to earlier in the decade. Direct mentions of DEI were even less frequent.

Mentions are dramatically down from recent high-water marks, including a 2021 that saw over 100 mentions of ESG each quarter.

Another change from companies is that they have slowed their hiring of people with DEI attached to their titles.

A 2023 report from LinkedIn found a surge between 2019 and 2022 in C-suites hiring for DEI-related titles like chief diversity and inclusion officer. The growth was largely seen as a response to the global protests against racism and police brutality following the murder of George Floyd by a white police officer in Minneapolis.