Texas Attorney General Ken Paxton, along with 10 other state attorneys general, has issued a warning to major financial institutions regarding their diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) commitments. The officials caution that certain policies could lead to enforcement actions if found to violate state or federal laws following a review.
The letter, addressed to BlackRock, Goldman Sachs, JPMorgan Chase, Bank of America, Citigroup, and Morgan Stanley, raises concerns over the banks’ continued commitment to DEI and ESG initiatives. It argues that policies involving race- and sex-based quotas and climate-focused investment strategies may conflict with legal, contractual, and fiduciary obligations. The financial institutions have been invited to respond as part of the review process to determine potential regulatory action.
The warning follows the recent withdrawal of all major US banks from the Net-Zero Banking Alliance (NZBA), a global initiative promoting climate-conscious banking. Attorney General Paxton had previously urged financial institutions to exit the NZBA, describing it as an activist-led initiative that prioritises environmental goals over consumer and investor interests.
“Banks and financial institutions are finally starting to realise that ESG and DEI policies promoted by activist groups are bad for consumers and potentially unlawful,” Paxton stated. “Unlawful quotas and green energy schemes will not be tolerated, and institutions found violating the law will be held accountable.”
The letter builds on a broader investigation into financial institutions’ compliance with Texas Senate Bill 13, which prohibits government contracts with entities that boycott energy companies. In October 2023, Paxton launched a review into Wells Fargo, JPMorgan Chase, Morgan Stanley, Bank of America, and others for potential violations. The investigation into Wells Fargo was closed after the bank withdrew from the NZBA.
The warning reflects growing legal and political scrutiny over ESG and DEI policies within the financial sector, with state authorities signalling potential regulatory actions against companies that fail to comply with legal obligations.
