Kentucky officials threatened to divest the state from 11 financial institutions on Tuesday over what it deemed to be climate-conscious investing practices. Targeted firms include BlackRock, JPMorgan Chase, and Citigroup, all of which have publicly pledged to incorporate pro-environment principals into their financial strategies.

Such policies, Kentucky State Treasurer Allison Ball said in a press release, “boycott fossil fuels” and “intentionally choke off the lifeblood of capital to Kentucky’s signature industries.” The announcement follows a state bill passed last year directing her office to publish an annual list of financial institutions involved in a so-called “energy company boycott.” 

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Kentucky’s efforts are the latest in the Republican Party’s larger campaign against what are known as environmental, social, and governance, or ESG, investing principles. After years of activist efforts to get financial firms to disclose and account for their climate risks, ESG practices — which, in theory, prioritize investments in renewable energy, for example, over oil and gas — have moved from the sidelines to the mainstream, becoming a buzz-acronym on Wall Street. In March, the Securities and Exchange Commission, or SEC, the federal agency meant to protect U.S. investors, proposed new rules that would require companies to disclose their carbon emissions as well as the risks posed to their business by climate change. According to the mutual fund research firm Morningstar, 90 percent of all companies now have, or are in the process of creating, ESG strategies.

But over the past year, Republicans have staked their ground against what Florida Governor Ron DeSantis called “woke capitalism.” As of last August, 17 states have proposed or adopted legislation to limit business with institutions that consider environmental and social criteria in their investment practices. West Virginia and Texas created similar lists to Kentucky’s last year, and Florida, Louisiana, and Missouri pulled a collective $3 billion dollars out of BlackRock, whose CEO has been one of the most outspoken financial leaders about the value of ESG investing. 

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Now, Republicans are using their control of the U.S. House of Representatives as a new tool in their fight against ESG, which they say could harm the fossil fuel industry as well as stakeholder profits. Patrick McHenry, a North Carolina Republican representative and new chair of the House Committee on Financial Services, called the SEC’s climate risk disclosure rules a “far-left social agenda” and has pledged close oversight of regulators. Other House Republicans will call asset managers to testify in hearings on their investments. At the state level, Republican state attorneys general have motioned that they are prepared to take the SEC policies to court if the rules are finalized, according to Inside Climate News

Yet when you look at the current state of climate-aligned investing on Wall Street, it seems Republicans’ concerns are much ado about nothing. While asset managers have started to invest growing subsets of funds in adherence with ESG principles, which consider things like the effects of climate change and the social impacts of supply chains, most of their money remains in funds that don’t account for carbon emissions. JPMorgan and Citigroup, both members of the United Nations’ Net-Zero Banking Alliance, were among the top financiers of the fossil fuel industry in 2021, according to a recent report. (Vanguard, the largest asset manager after BlackRock, dropped out of the alliance last month following backlash from Republican attorneys general.) What counts as an ESG investment also remains vague and undefined, which can lead to greenwashing; some financial companies’ energy transition funds, for example, can still invest in fossil fuel companies. While last year was the first in history where more money was raised in debt markets for green projects than for fossil fuel companies, Big Oil is still getting more money from high gas prices and private equity, and banks and asset managers appear to remain committed to funding the industry. 

In the wake of Kentucky’s announcement, the 11 financial firms added to the state’s restricted list have 30 days to notify the treasury of their holdings in energy companies, and 90 days to “stop engaging” in boycotts. If they fail to comply, the Kentucky government will pull its money from the institutions. So far, some of the listed companies have asserted their fossil fuel bonafides in response. In a statement to The Hill, a JPMorgan Chase spokesperson said, “We are among the largest financiers of the U.S. traditional and renewable energy industries, including in Kentucky where we serve some of its largest energy companies and utilities.” For Reuters, BlackRock pointed to its investments in energy companies like ExxonMobil and Occidental Petroleum.