• Texas AG Ken Paxton and nine other attorneys general are investigating six major banks over DEI and ESG policies
• The probe questions diversity hiring, board quotas, and climate commitments, citing potential legal violations
• Banks have 45 days to respond, facing possible enforcement action if found non-compliant
• The investigation follows previous scrutiny of ESG initiatives and growing political opposition to corporate DEI efforts

A group of attorneys general from 10 states, led by Texas Attorney General Ken Paxton, has launched an investigation into the diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) policies of six major financial institutions.

The letters, sent last Thursday, were addressed to Bank of America, BlackRock, Citi, Goldman Sachs, JPMorgan Chase, and Morgan Stanley, warning that their diversity hiring and supplier diversity goals could lead to legal action.

Paxton’s inquiry focuses on whether the firms' stated employment and board diversity targets, as well as their ESG proxy voting policies, violate state or federal laws.

The letter alleges that race- and gender-based hiring quotas and climate-focused financial commitments could breach fiduciary duties by prioritizing political agendas over financial performance.

The banks have been given 45 days to respond to the inquiry, which could escalate into enforcement action if their practices are found to be unlawful.

The investigation follows a previous probe into some of the same financial institutions, which Paxton dropped after several firms withdrew from the United Nations-backed Net-Zero Banking Alliance (NZBA). Bank of America, JPMorgan Chase, Morgan Stanley, Citi, and Goldman Sachs all left the initiative between December and January, citing increasing political pressure.

BlackRock’s recent departure from the Net-Zero Asset Managers initiative (NZAM) also led to the suspension of the group’s signatory tracking.

As scrutiny over ESG and DEI policies intensifies, major banks face mounting legal and political challenges.

The attorneys general are requesting detailed information on how these firms have implemented their diversity hiring and vendor inclusion programs.

They are also probing how these financial giants have participated in climate-focused alliances, such as NZBA, NZAM, and Climate Action 100+, and whether their proxy voting decisions align with stated ESG priorities.

Paxton’s latest action comes amid broader efforts by conservative leaders to roll back corporate DEI and ESG commitments. Former President Donald Trump has pledged to dismantle President Joe Biden’s DEI policies, ordering federal agencies to scrutinize private-sector diversity programs.

This wave of opposition has led to heightened regulatory risks for businesses navigating ESG and DEI commitments while balancing shareholder interests.

JPMorgan Chase CEO Jamie Dimon addressed the growing anti-ESG and anti-DEI sentiment at the World Economic Forum in Davos last week.

When asked how his firm would respond to activist pressure, Dimon said, “Bring them on.” While he acknowledged that JPMorgan’s policies may evolve, he emphasized that the bank will continue its outreach to minority communities and pursue its climate-related goals.

“We’re not trying to pander to any which side or any which thing,” he told CNBC’s Squawk Box.

Legal challenges related to ESG policies have been mounting. BlackRock recently settled a lawsuit with the state of Tennessee, which accused the firm of misleading consumers about its ESG investment strategies.

While BlackRock agreed to provide additional disclosures for its funds, it was not fined, and no laws were found to have been violated. However, the asset manager remains entangled in another lawsuit filed by Paxton, who, along with attorneys general from other states, is suing BlackRock, Vanguard, and State Street for allegedly conspiring to “artificially constrict” the coal market.

BlackRock and State Street have dismissed the lawsuit as baseless.

Ten state attorneys general, led by Texas AG Ken Paxton, are investigating six major banks over their DEI and ESG policies. The probe questions diversity hiring, board quotas, and climate commitments, alleging potential legal violations. Banks have 45 days to respond, facing possible enforcement action.