Over the past 18 months, the environmental, social and governance (ESG) agenda has suffered setbacks in the form of corporate DEI initiatives, falling investment dollars and the collapse of the Net Zero Insurance Alliance.

Just last month, major banks withdrew from the Net Zero Alliance and Meta canceled many of its diversity, equity and inclusion (DEI) initiatives. ESG seems to be losing touch. But don't be fooled.

A closer look at banks' rhetoric reveals they are still filled with die-hard ESG financiers. Many of the touted changes are superficial or cosmetic rather than expressions of underlying philosophical shifts.

Dozens of Fortune 500 companies, including McDonald's and Walmart, representing trillions of dollars in market capitalization and millions of employees, are scaling back or eliminating their DEI programs in 2024. ESG-labeled investment funds have hemorrhaged cash over the past two years. The incoming administration has pledged to abandon DEI in federal agencies.

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The net-zero insurance coalition has unraveled over the past year and a half amid a mass exodus of insurance companies, when many state attorneys general worried that joining such a coalition could violate antitrust and anti-collusion laws. U.S. states have withdrawn billions of dollars from BlackRock over ESG concerns.

These changes are a welcome corrective to the flawed and entrenched ideological aims of ESG advocates. The latest domino to fall are large U.S. financial institutions. Goldman Sachs, Wells Fargo, Citigroup, Bank of America and JPMorgan Chase have all withdrawn from the global net-zero banking alliance.

Even BlackRock, once a strong advocate of ESG, has withdrawn from net-zero asset management plans. While this seems consistent with other retreats in ESG, cynicism is warranted.

If you look at the press releases from these large financial institutions, you will see that they are unrepentant and still intend to pursue net zero goals. For example, Goldman Sachs stated: "Our priority remains helping customers achieve their sustainability goals and measuring and reporting on our progress." Citigroup was more blunt: “We remain committed to achieving net zero emissions.”

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BlackRock is the most obviously unrepentant. “Our membership in some of these organizations has caused confusion ... and exposed us to legal investigations ... (but) it will not change the way we develop products and solutions for our clients or the way we manage their portfolios. ” Translation: “We just want to stay away from questionable PR, but we won’t change anything about how we do business.”

The moves by these big banks appear to mimic BlackRock CEO Larry Fink's strategy of not using the term "ESG" because it is a political hot potato but remaining committed to "sustainability." BlackRock remains heavily invested in green infrastructure and renewable energy projects.

If their clients explicitly ask for such investments, that's fine. But as American learned last week, pension fund managers have a fiduciary duty to pursue the best financial returns for their clients, and they can be held liable for using the funds they manage for other purposes.

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While U.S. financial institutions have made superficial progress in withdrawing from the destructive global net-zero alliance, they appear to be insincere when it comes to truly changing their ways. That's not surprising given the small number of changes in bank staff. We also see no evidence of change on the ESG front.

Instead, they appear concerned about public pressure and criticism from incoming federal and state officials. Leaving these alliances also gives them more freedom to express their intentions for net zero emissions without having to deliver by a fixed date.

But if ESG policies were distracting and damaging before, they remain so now. Ideological ESG priorities can harm a company’s ability to operate well and benefit its contractual stakeholders. It’s hard for a company to be profitable without pursuing a variety of social justice priorities.

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Banks should better articulate their commitment to maximizing shareholder value and doing business with everyone. Pursuing long-term profit success benefits shareholders, workers, suppliers and customers.

Most companies, especially unrepentant financiers, need to clean up their HR departments and focus on value creation rather than racial identity politics or expensive virtue signaling on environmental and social issues. As the American Airlines case illustrates, companies that fail to do so may well be in breach of their fiduciary duties to customers and shareholders.

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