This story is published in partnership testa news organization investigating global health threats. Sign up to subscribe to our exam newsletter.
Let’s say you are an American worker with a retirement plan. We want our company to consider the environment when deciding where to invest in the company, or how wildfires, heat waves and hurricanes will affect our portfolio.
If one of President Donald Trump’s ministers has got his way, you may not have much choice.
Chris Wright, recently confirmed as a US Energy Secretary, aims to dismantle US Department of Labor rules governing 401(k) and other private retirement plans for over 150 million people. The regulations allow asset managers to weigh environmental, social, governance, or ESG factors as long as the retiree is financially profitable.
Wright was CEO of Fracking, the company Liberty Energy in 2023, and the company and around 20 states sued the agency to overturn the rules. The Liberty case was dismissed by a federal judge in Texas in February, but the fight over ESG finance may only be beginning.
The fossil fuel industry and its allies have launched appealing attacks against sustainable investments, asset managers and pension funds, and the federal regulatory bodies that oversee them. ESG investments can illegally place political ideologies on the economic benefits of retirees, they argue in the lawsuit. The Conservative Policy Guide Project 2025 calls on the Trump administration to overturn current rules and ban ESG on most retirement plans.
With only about $14 trillion in private retirement funds, the approach to investment has a high interest not only for individual retirees, but also for the oil and gas industry.
January, an Examination survey It turns out that the fossil fuel industry is using sustainable finance. More than $286 billion of loose form of green finance, known as sustainability-related loans, has been made to businesses in the polluting industry, from oil and gas to mining and timber. Even if businesses expanded their pollution activities and increased their carbon footprint while benefiting from loans, this fund was often counted by banks against their sustainable investment targets.
However, in the months since Trump’s election, fear of political fallout and legal attacks on sustainable investment have led many financial institutions to abandon their ESG goals altogether.
January, Federal Judge Reed O’Connor He ruled American Airlines If BlackRock considers the ESG investment criteria and claims that the airline’s 401(k) investment with BlackRock violated its obligations to retirees because Americans were unable to maintain their own company’s profits apart from their obligations to retired investors. At about the same time, BlackRock dropped out of Net Zero Asset Managers, an industry group dedicated to achieving net zero carbon emissions.
BlackRock has joined us and an array of major Canadian banks, including JPMorgan Chase, Citibank and Goldman Sachs. I recently retreated From the Net-Zero Banking Alliance. In a video appearance on February 17, Wright denounced NetZero’s target as “sinister” and said he was used to “reduce human freedom.”
Large banks have abandoned their voluntary climate alliance. Now critics are looking for new laws.
Lisa Sachs, director of Columbia University’s Center for Sustainable Investment, said efforts to ban ESG policies seek to support the fossil fuel industry at the expense of retirees. She said ESG factors banning retirement plans blindfolded property managers, forcing them to ignore real financial risks such as floods that affect property values. This would undermine the ability to make safe long-term investments for pensioners, she said.
“This is the exact opposite of free market ideology,” Sachs said.
ESG faces political backlash
Many legal disputes revolve around how ESG investment is defined. Experts agree that the term is ambiguous and manipulated.
ESG investment funds take environmental and social risk into consideration in decision-making and do not necessarily invest for social purposes, Sachs said. She cites Coca-Cola as a highly rated company for ESG, as she determined that the evaluators do a good job managing environmental and social risks despite the product contributing to obesity and chronic diseases around the world.
Financial companies misrepresent the ways ESG considerations are most frequently used, Sachs said they call marketing a form of greenwashing. Sachs said it was mainly these misrepresentations that put the ESG policy in the crosshairs.
“Greenwashing has led to political backlash,” she said.
Jonathan Berry, a free energy lawyer in the case against the Labor Bureau, said Liberty’s challenge was not opposed to asset managers considering environmental factors that are financially material. Instead, the company opposes the provisions of “tiebreakers” in the rules that allow asset managers to weigh non-financial ESG factors when determining economically equal investments.
“It opens the door for divided loyalty,” Berry said.
Berry is also one of the authors of Project 2025, a policy playbook that reflects proposals in many of the Trump administration’s early actions.
Among the Project 2025 prescriptions, we will remove ESG considerations from individual retirement plans and similar plans for federal employees, as well as the possibility of enforcement action for asset managers who have ESG policies while administering federal retirement plans.
However, not all conservatives are on board. Some project 2025 contributors insist in the “Alternative View” section these recommendations have gone too far, and workers should be able to decide to invest in their retirement plans to invest for themselves.
“Although ESG investment is often not a sound financial strategy, offering ESG investment options is not a wrong way for retirement plans,” the opponent wrote.
Berry agreed that the term ESG is “deliberately resilient.” But he said it often works: ESG investment is defined as examining the environmental risks of stepping into the door, and is then used to promote political targets such as the sale from fossil fuels.
What is ESG, an investment strategy during Republican attacks?
In 2023, a conservative group sued the New York City pension fund, which had been sold from fossil fuels, claiming the funds had violated the retirement obligations. The case was dismissed last year.
In February, the campaign against ESG suffered another setback.
Matthew Caxmarick, a conservative federal judge in Texas appointed by Trump; Liberty Energy’s lawsuit has been dismissed It is trying to overturn the Labor Bureau’s ESG regulations. Liberty’s claim that ESG factors cannot be applied when deciding on a financially equal plan would require instead to select based on “any randomness.”
The ruling means that if the Trump administration wants to limit financial options and ban ESG consideration from the retirement plans of the majority of American workers, it is likely that they will need to act independently through the Department of Labor.
Dan Terpstra, a retired supercomputer scientist at the University of Tennessee, has been treating his retirement fund with caution over the years to ensure that he is not invested in fossil fuels.
A proactive member of the Presbyterian Church and advocate for sustainable investment, Terpstra worries that cracking down on ESG policies will “force them to do the right thing.”
The prospect of banning such a plan, he said, is “an erosion of our personal freedom in serving the vision of America that I barely recognize.”
