More and more Wall Street firms are freaking out about the climate. This is why.

Many of the world's largest financial companies have burnished their environmental images in recent years by promising to use their financial muscle to fight climate change.

Now Wall Street has gone bankrupt.

In recent days, financial world giants including JPMorgan, State Street and Pimco have all withdrawn from a group called Climate Action 100+, an international coalition of money managers that pushed major companies to tackle climate problems.

Wall Street's retreat from previous environmental pledges has been slow and steady for months, especially as Republicans began blasting political attacks saying the investment firms were engaging in “woke capitalism.”

But in recent weeks, things have accelerated considerably. BlackRock, the world's largest asset manager, has scaled back its involvement in the group. Bank of America backtracked on its commitment to stop financing new coal mines, coal-fired power stations and drilling projects in the Arctic. And Republican politicians, sensing the momentum, called on other companies to follow suit.

The reasons behind the burst of activity show how difficult it is proving to be for the business world to deliver on its promises to become more environmentally friendly. While many companies say they are committed to fighting climate change, the devil is in the details.

“This was always cosmetic,” says Shivaram Rajgopal, a professor at Columbia Business School. “If signing a piece of paper would get these companies in trouble, it's no surprise they get the hell out of it.”

U.S. asset managers have a fiduciary duty to act in the best interests of their clients, and financial firms worried that a new strategy from Climate Action 100+ could expose them to legal risks.

Since its founding in 2017, the group has focused on getting listed companies to share more information about their emissions and identify climate-related risks to their businesses.

But last year Climate Action 100+ said it would shift its focus to pushing companies to reduce emissions with what it called phase two of its strategy. The new plan called for asset managers to pressure companies like Exxon Mobil and Walmart to adopt policies that could include using fewer fossil fuels.

Besides the risk that some clients would disapprove and possibly file a lawsuit, there were other concerns. One is that acting jointly to shape the behavior of other companies could violate antitrust rules.

“In our view, making this new commitment across all of our assets under management would raise legal considerations, particularly in the US,” a BlackRock spokesperson said in a statement.

BlackRock also said one of its subsidiaries, BlackRock International, would continue to participate in the group – a tacit acknowledgment of the different regulatory environment in Europe. BlackRock also said it is initiating new features that will allow customers to choose whether to pressure companies to reduce their emissions.

A spokesperson for State Street said the company also saw potential legal risks, and determined the new approach “will not be consistent with our independent approach to proxy voting” and working with the companies in which it invests.

JPMorgan said it was withdrawing from the group due to the fact that the company had developed its own framework for addressing climate risks in recent years.

On Friday, the day after JPMorgan, BlackRock and State Street withdrew, Pimco, another major asset manager, followed suit. “We have concluded that our participation in the Climate Action 100+ is no longer aligned with PIMCO's approach to sustainability,” a firm spokesperson said in a statement.

A spokesman for Goldman Sachs Asset Management, another member, declined to comment Saturday on whether it planned to remain in the group.

The breakup of Climate Action 100+ was a victory for Rep. Jim Jordan, Republican of Ohio, who has led a campaign against companies pursuing ESG goals, short for environmental, social and governance factors.

Embracing ESG principles and speaking out on climate issues has become commonplace in corporate America in recent years. Chief executives warned of the dangers of climate change. Banks and asset managers formed alliances to phase out fossil fuels. Trillions of dollars were allocated to sustainable investing.

At the same time, opposition grew, with Republicans claiming that banks and asset managers were supporting progressive politics with their climate commitments.

Some states, including Texas and West Virginia, banned banks from doing business with the state if the companies distanced themselves from fossil fuel companies. And at the end of 2022, Mr. Jordan began an antitrust investigation into the groupand called it a “climate-obsessed corporate cartel.”

He has Thursday said in a post on X that the news represented “major victories for freedom and the American economy, and we hope more financial institutions will follow suit and refrain from stealthy ESG actions.”

Mindy Lubber, Ceres CEO and Climate Action 100+ steering committee member, disputed the idea that the new strategy represented a change from a focus on improved disclosure.

“Phase two is not that different,” she said. “It's basically investors working with companies and saying, 'Okay, you've disclosed the risk. We just want to know how you're going to handle it.' Because that's what investors want. How do you deal with risks?”

Ms Lubber said she was disappointed that the major asset managers had withdrawn from Climate Action 100+, but hoped they would continue their efforts to reduce the risks posed by man-made heat waves, floods, fires and storms worsened. -causes global warming. “You can't come up with a new theory that climate risk is no longer a material financial risk,” she said.

Several companies that withdrew from Climate Action 100+ said they remain committed to the issue. JPMorgan said it has a team of 40 people dedicated to sustainable investing and that it believes “climate change continues to pose material economic risks and opportunities for our clients.”

Aron Cramer, CEO of BSR, a corporate sustainability consultancy, said Wall Street firms were responding to political pressure but not completely abandoning their climate commitments.

“The political costs have increased, the legal risk has increased,” he said. “That said, these companies are not making U-turns,” he added. “They keep thinking about the climate. That won't go away. It is adapting to the current environment.”