You’ve seen greenwashing, which the Natural Resources Defense Council (NRDC) defines as “the act of making false or misleading statements about the environmental benefits of a product or practice, […] all while gaming the system or profiting off well-intentioned, sustainably minded consumers.”
But have you heard of green scrubbing?
No, because I just invented the term for the political pushback against ESG (environmental, social, and governance) standards at publicly traded companies that do business in the U.S.
In the past, companies have wanted to sprinkle annual reports with terminology that makes them seem more eco-minded, like net-zero carbon emissions and climate ERGs (employee resource groups). Now, it seems the reverse is happening, especially at banks and financial institutions that are facing a particular wrath. Hence my term “green scrubbing” which references the literal scrubbing of ESG policies and procedures as a result of threatened political action.
ESG no more?
As I wrote in Observer in late February, Wall Street is navigating the shifting landscape of DEI (diversity, equity, and inclusion), with some firms quietly retreating from DEI efforts overall. Similar efforts are being seen in the ESG space. This is a result of lawsuits at the state level and movement at the federal level.
The vast majority of major U.S. banks have quit the United Nations’ Net-Zero Banking Alliance (NZBA), including Goldman Sachs, Wells Fargo, Morgan Stanely, and more. These departures largely came after Texas Attorney General Ken Paxton Sued major investment firms for “conspiring to artificially constrict the market for coal through anticompetitive trade practices.” In other words, he accused climate-conscious investments of acting as a monopolistic tactic that pushes out legacy fuel sources.
As I wrote in a recent article for Observer, the NZBA “aims to make the financial sector more environmentally sustainable by converging banks, insurers and investors to set sustainability targets in line with the group’s standards.” The organization maintains 140 bank members across 44 countries that manage $64 trillion in total assets. Before and at the start of Trump’s second term in office, U.S. banks pulled out of the group en masse in a proactive approach to avoid regulatory reproach.
In Texas, coal accounts for 19% of the state’s energy profile, according to the Texas Comptroller. Wind actually accounts for 24% of the profile, with natural gas leading at 42%. Solar and other sources remain a minority. With increasing energy demands from smarter technology, alternative energy sources are more valuable to the grid than ever before, according to experts I’ve recently interviewed for upcoming CNBC coverage. Cutting out any one source would only be to the detriment of the people, particularly with increases in electrification and the innovation trajectory of big tech.
Despite many NZBA members worried the group isn’t doing enough for the environment, it could be said that some cooperation is better than none.
And despite the mass exit, banks confirm they remain committed to their existing net-zero goals. “Financing sustainable initiatives is increasingly linked to long-term profitability and market demand,” Sunil Kansal, head of consulting and valuation services at the ESG consulting firm Shasat, told me in an interview for Observer. “What matters is not the framework but the outcome. Banks will continue to drive the green transition, adapting their strategies to evolving circumstances.”
Law firm Vinson & Elkins wrote in an article, “Many countries, especially in the EU, […] continue to adopt and implement ESG disclosure and compliance regimes. Blue states like California have enacted significant climate-related laws that will impact many companies, even those based outside the state.”
Vanguard, BlackRock, and State Street collectively hold upwards of 30% of U.S. stock and have been a driving force behind ESG funds. These “big three” have been directly targeted with litigation, resulting in a lower ESG profile. Greenwashing, anticompetitive behavior, and reverse discrimination could be at the forefront of that litigation.
What Vinson & Elkins calls “the anti-ESG playbook” is placing pause on furthering ESG investing and disclosure efforts. However, that doesn’t mean we’re out of luck.
A way forward—for companies, shareholders and, most crucially, the planet
I’m the type of journalist—and person—who likes to provide some sort of forward-thinking solution for the planet. I think all climate activists are like that, including RegenAll. Despite active greenscrubbing efforts across the financial sector, there are things we can do.
The first is to remain invested in your existing climate-conscious funds and stocks, especially if you have a longer time horizon to work with (meaning you don’t need the money from the investments for a number of years). While there may be fluctuations in the ESG markets in the short term as a result of litigation and regulatory pushback, we need these renewable energy solutions for long-term sustainability of the planet, people, and—yes—even companies.
Additionally, use your shareholder voting rights to make your voice heard and vote in board members at companies who can propel green energy efforts forward.
Regulation tends to move at a snail’s pace in the US, which could be positive for ESG efforts on the defense to save what we’ve built. Meanwhile, companies in the modern world operate on a global scale, and reporting requirements and ESG standardization are increasingly robust in the EU and beyond. The US does not exist in a vacuum, and it’s important we look at the forest through the trees.
At the individual scale, continued electrification and other individual climate-conscious efforts do help turn the tides. Recently, GM Energy launched bidirectional charging capabilities for its electric vehicles. This means EVs are becoming a grid asset and not just a mobility asset.
While green scrubbing is indeed taking place, it’s not the be-all-end-all for climate activism. Staying aware of trends in the space helps us know which actions we must take going forward and further highlight the solutions at our disposal (or should I say, at our compost?).
Rachel Curry is a journalist based in Lancaster, Pennsylvania, contributing to publications like CNBC and LNP. Her work focuses on finance and technology on a global scale, as well as local issues impacting her community. See more of her work at www.writingsofrachel.com, and contact her at hi@writingsofrachel.com or linkedin.com/in/rachelcurry95.
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