In recent years, Wall Street firms have tried to talk up their commitment to the environment and social justice. Now they are singing a different tune.

Large US banks such as Goldman Sachs and JPMorgan Chase are among a clutch of global financial services firms that have been touting their business relationships with oil and gas companies. They are doing so to placate politicians in Republican-led states who are penalising them for not doing enough to support the fossil fuel industry.

So far, their entreaties have fallen on deaf ears. West Virginia last month banned five financial firms — BlackRock, JPMorgan, Goldman Sachs, Morgan Stanley and Wells Fargo — from banking activities in the state.

Riley Moore, West Virginia state treasurer, accused the firms of having “policies aimed at weakening our energy industries” in a state where coal and fossil fuel taxes are the third-largest source of revenue.

The West Virginia move is the latest in a wave of attacks on financial institutions that Republican lawmakers view as having gone too far in their subscription to the environmental, social and governance, or ESG, agenda.

Some of the lenders that have been targeted in West Virginia have responded by brandishing their financing of fossil fuels, a discordant volte-face that follows years of trying to convince climate change activists that they are not complacent about the environment.

In a July letter to West Virginia’s treasurer, Goldman said it had provided more than $118.9bn in financing to fossil fuel companies since 2016, and $17.8bn in financing last year alone.

In a similar letter, JPMorgan’s general counsel Stacey Friedman touted the bank’s $42.6bn credit exposure to oil and gas companies as evidence that it did not discriminate against fossil fuel companies. Friedman also said in 2021 the bank financed and facilitated $106bn for green objectives, such as renewable energy.

“This decision is shortsighted and disconnected from the facts. Our business practices are not in conflict with this anti-free market law,” JPMorgan said in a statement. Goldman Sachs declined to comment beyond its letter.

The restrictions in West Virginia follows two Texas laws adopted last year that prohibit financial firms based on their gun policies as well as their treatment of oil and gas companies for climate change purposes.

The Texas laws require the state’s comptroller to identify companies that should be banned and demands firms verify that they do not boycott firearms, ammunition and energy companies.

A handful of firms — including JPMorgan, Citigroup, Goldman and Bank of America — withdrew from the Texas municipal bond market after the legislation went into effect in September 2021, according to academic research published last month. Citi has said it has since resumed underwriting Texas muni bonds.

Almost 90 global firms have written to Texas to emphasise that they invest in oil and gas companies. Private equity giant Apollo said in a June letter that chief executive Marc Rowan “has publicly stated that Apollo-managed funds will continue to finance fossil fuel companies”. Sumitomo Mitsui, one of Japan’s largest banks, told the state it had financed $208mn in US oil and gas projects.

The restrictions implemented by Republicans do not yet pose a significant revenue risk but that could change if the efforts to freeze banks out of state business become more widespread, analysts said.

“From an optical standpoint, it’s not the headlines you want,” said Gerard Cassidy, analyst at RBC Capital Markets, adding: “As it gains in materiality, then certainly, I think there will be more discussion about it.”

Cassidy said: “The pendulum has swung so far left in the last five years, particularly with the sustainable energy [and] ESG policies. Now the pendulum is coming back . . . we’re not ready to leapfrog yet into a sustainable-energy world.”

The swinging of that pendulum is being felt, in differing degrees, across Wall Street. Last month, BlackRock said it voted for fewer environmental and social shareholder petitions this year compared with 2021. The world’s largest money manager argued that shareholder proposals were becoming too prescriptive and that Russia’s invasion of Ukraine had changed its calculus.

Banks will soon face another test in Florida. Last month, Republican Florida governor Ron DeSantis said he would propose legislation next year to “protect [voters] from the ESG movement”, which he accused of “targeting disfavoured individuals and industries to advance a woke ideological agenda”.

DeSantis, a possible 2024 presidential contender, said he wanted to ban administrators at the agency that oversees the state’s pensions funds from using money managers who consider ESG factors. Instead they would be required to “only consider maximising the return on investment on behalf of Florida’s retirees”.

The challenge with such restrictions is that there are no settled definitions in the US of ESG, said Joshua Lichtenstein, a partner at law firm Ropes & Gray. “If you are a real estate fund, you can’t ignore sea level rise when buying coastal buildings. It becomes actually an investor prudence issue,” he added.

Some state Republicans in West Virginia have said they fear banning global banks over their ESG commitments could result in higher borrowing and financing costs for the takes. Two Republicans in Arizona thwarted similar legislation on such grounds earlier this year.

Economists in July estimated that Texas state and local borrowers will pay an additional $303mn to $532mn in interest on the $32bn of municipal bonds that were issued after the boycott measures were introduced.

“We see massive increase in yields for these most affected places in Texas,” said Daniel Garrett, a professor at the University of Pennsylvania and co-author of the research.

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