This story is published in partnership with The Examination, a news organization that investigates global health threats. Sign up to subscribe to The Examination’s newsletter.
Say you’re an American worker with a retirement plan. Out of concern for the planet — or how wildfires, heat waves and hurricanes might affect your portfolio — you want the company managing your money to consider the environment in deciding where to invest.
If one of President Donald Trump’s Cabinet secretaries gets his way, you might not have much choice.
Chris Wright, recently confirmed as U.S. Secretary of Energy, has been aiming to dismantle a U.S. Department of Labor rule that governs 401(k)s and other private retirement plans for more than 150 million people. The regulation allows asset managers to weigh environmental, social, and governance — or ESG — factors as long as they financially benefit retirees.
Wright was CEO of fracking company Liberty Energy in 2023 when the company and about two dozen states sued the agency to overturn the rule. Liberty’s case was dismissed in February by a federal judge in Texas, but the battle over ESG finance may be just beginning.
The fossil fuel industry and its allies have launched a multipronged assault against sustainable investing, suing asset managers and pension funds and federal regulatory agencies that oversee them. ESG investing can illegally put political ideology over the financial interests of retirees, they argue in lawsuits. The conservative policy guide Project 2025 has called for the Trump administration to overturn current rules and prohibit ESG for most retirement plans.
With roughly $14 trillion held in private retirement funds alone, their approach to investing has high stakes not only for individual retirees but also for the oil and gas industries.
In January, an investigation by The Examination found the fossil fuel industry taking advantage of sustainable finance. More than $286 billion in a lax form of green finance called sustainability-linked loans were made to companies in polluting industries — from oil and gas to mining and timber — the investigation, published in partnership with Mississippi Today and the Toronto Star, revealed. This money was often counted by banks toward their sustainable investing targets, even though in some cases companies expanded polluting activities and increased their carbon emissions while they benefited from the loans.
But in the months since Trump’s election, fear of political fallout and legal attacks on sustainable investing have prompted many financial institutions to abandon ESG goals altogether.
In January, Texas federal judge Reed O’Connor ruled against American Airlines in a case alleging that the airline’s 401(k) investments with BlackRock violated its duty to retirees because BlackRock considered ESG criteria in its investments and American failed to keep its own corporate interests separate from its obligations to retirement investors. Around the same time, BlackRock dropped out of the Net Zero Asset Managers, an industry group dedicated to achieving net-zero carbon emissions.
BlackRock joined an array of leading U.S. and Canadian banks, including JPMorgan Chase, Citibank, and Goldman Sachs, that recently withdrew from the Net-Zero Banking Alliance. In a video appearance on February 17, Wright denounced net-zero targets as “sinister” and said they are being used to “shrink human freedom.”
Lisa Sachs, director of the Center on Sustainable Investment at Columbia University, said efforts to ban ESG policies seek to help the fossil fuel industry at the expense of retirees. Prohibiting ESG factors from retirement plans would put blinders on asset managers, she said, forcing them to ignore real financial risks, such as floods affecting real estate value. This would undermine their 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
Much of the legal dispute revolves around how ESG investing is defined — and experts agree the term is vague and easily manipulated.
An ESG investment fund is one that takes environmental and social risks into account in its decision-making, not necessarily one that invests for social purposes, Sachs said. She cites Coca-Cola as a company that has a high ESG rating because assessors have deemed it does a good job managing the environmental and social risks to its business, even though its product contributes to obesity and chronic disease worldwide.
Financial companies have misrepresented how ESG considerations are most often used, Sachs said, calling the marketing a form of greenwashing. Sachs said it is largely these misrepresentations that have put ESG policies in the crosshairs.
“The greenwashing is what led to the political backlash,” she said.
Jonathan Berry, the attorney for Liberty Energy in its suit against the labor department, said Liberty’s challenge doesn’t object to asset managers considering environmental factors when they are financially material. Instead, the company opposes a “tiebreaker” provision in the rule that allows asset managers to weigh non-financial ESG factors when deciding between investments that are economically equal.
“It cracks open the door for divided loyalties,” Berry said.
Berry is also one of the authors of Project 2025, the policy playbook whose proposals have been reflected in many of the Trump administration’s early actions.
Among Project 2025’s prescriptions: removing ESG considerations from private retirement plans and a similar plan for federal employees, as well as possible enforcement actions against asset managers that have ESG policies while managing federal retirement plans.
But not all conservatives are on board. Some Project 2025 contributors argue in an “alternative view” section that these recommendations go too far and that workers should be able to decide on investments in their retirement plans for themselves.
“Even though ESG investing is often not a sound financial strategy, it is not wrong for retirement plans to offer ESG investment options,” the dissenters write.
Berry agreed that the term ESG is “deliberately elastic.” But he said it often works the other way around: ESG investing is defined as considering environmental risks to get a foot in the door, and then used to push for political goals like divesting from fossil fuels.
In 2023, conservative groups sued New York City pension funds that divested from fossil fuels, alleging the funds had breached their duties to retirees; that case was dismissed last year.
In February, the campaign against ESG suffered another setback.
Matthew Kacsmaryk, a conservative federal judge in Texas appointed by Trump, dismissed Liberty Energy’s lawsuit seeking to overturn the labor department’s ESG rule. Liberty’s argument that the department cannot apply ESG factors when deciding between financially equal plans, he ruled, would require it to choose based on “arbitrary randomness” instead.
The ruling means that if the Trump administration wants to restrict financial options and prohibit ESG considerations from the retirement plans of the majority of American workers, it will likely have to act on its own, through the labor department.
Dan Terpstra, a retired supercomputer scientist at the University of Tennessee, has been careful over the years to ensure his retirement funds are not invested in fossil fuels.
An active member of the Presbyterian Church and an advocate for sustainable investing, Terpstra worries that a crackdown on ESG policies would be “forcing us away from doing the right thing.”
The prospect of banning such plans, he said, would be “an erosion of our personal freedoms in service of a vision of America that I barely recognize.”
This story was originally published by Grist with the headline Trump’s energy secretary pushed legal attack on green investing on Mar 4, 2025.
Former fracking company CEO Chris Wright played a key role in efforts to roll back workers’ choices in socially conscious ESG investing. Business, Economics, Politics Grist
