Texas and nine other Republican-led states are intensifying their scrutiny of diversity, equity, and inclusion (DEI) programs on Wall Street, requesting information from major financial firms regarding their hiring and supplier diversity policies. This action aligns with the Trump administration’s efforts to dismantle DEI initiatives.
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Texas Attorney General Ken Paxton sent letters to leading financial institutions, including Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Citigroup, and BlackRock. The letters assert that these firms’ DEI efforts appear to “unlawfully advance discriminatory” practices. Paxton demanded answers to a series of questions about their programs, suggesting potential breaches of fiduciary duty due to “ulterior political motives or agendas.” He argues that investment decisions should prioritize maximizing shareholder value rather than advancing political goals.
Texas Attorney General Ken Paxton speaking at a press conference.
The firms have been given 45 days to respond to the inquiry, with Paxton warning of potential legal action if they fail to comply. While Goldman Sachs and Citigroup declined to comment, other recipients have not yet issued statements. This investigation follows a recent executive order from former President Trump mandating federal contractors to confirm their adherence to non-discriminatory practices, including in DEI initiatives. Federal agencies are also tasked with compiling a list of publicly traded companies for potential investigation into compliance violations.
CEOs Defend DEI Initiatives Amidst Political Pressure
Despite the escalating political pressure, CEOs of major financial institutions like JPMorgan and Goldman Sachs have publicly affirmed their commitment to DEI. JPMorgan’s Jamie Dimon emphasized the importance of continuing outreach to diverse communities, including Black, Hispanic, LGBT, and veteran populations.
The attorneys general cited specific pledges and goals set by financial firms since 2021 aimed at increasing the representation of women and minorities. Examples include JPMorgan’s commitment to hire 4,000 Black students by 2024 and Goldman Sachs’ goal of spending over $1 billion with diverse vendors. These initiatives gained momentum following the MeToo movement and the 2020 death of George Floyd.
Broader Pushback Against ESG and Climate Initiatives
This scrutiny of DEI programs is part of a larger trend of Republican-led states challenging environmental, social, and governance (ESG) investing and climate-related initiatives. In November, Paxton led a lawsuit against BlackRock, Vanguard, and State Street, alleging antitrust violations through their use of climate investing strategies that purportedly suppress coal production. BlackRock refuted these claims as baseless.
Paxton’s recent letter also included inquiries about the firms’ net-zero emissions commitments, shareholder voting practices, and engagements with companies regarding transitioning away from fossil fuels. The attorneys general requested details on communications with environmental groups like Climate Action 100+ and justifications for supporting climate-focused shareholder proposals. Information related to steps taken to achieve net-zero goals was also requested. Several financial institutions, including those targeted by Paxton, have recently withdrawn from climate-focused groups. Attorneys general from Utah, Iowa, Indiana, and Alabama joined Texas in this action.
Conclusion: The Future of DEI on Wall Street
The escalating political pressure on Wall Street’s DEI programs raises significant questions about the future of these initiatives. While major financial institutions remain committed to fostering diversity and inclusion, the legal challenges and potential regulatory changes pose a considerable obstacle. The outcome of these inquiries and potential legal actions will likely have a substantial impact on the landscape of DEI in the financial sector.
