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(Bloomberg) — At a recent climate-finance meeting attended by Wall Street giants including BlackRock Inc. and Goldman Sachs Group Inc., no one spoke until a lawyer had finished reading out a disclaimer stating the group was not a cartel.

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The newly formed ritual is a direct reaction to the increasingly hostile position of the Republican Party toward firms trying to incorporate environmental, social or governance factors into their strategies. 

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Those attending the latest quarterly meeting of the International Sustainability Standards Board’s Investor Advisory Group, at which the cartel disclaimer was made, were free to discuss how to improve corporate disclosures on sustainability risks after the lawyer finished his statement, according to two people present who asked not to be identified describing a private gathering.

It’s a pattern that’s been repeated for the past few meetings, according to a spokesperson for the IFRS Foundation, the nonprofit that’s overseeing sustainability disclosure standards across the globe. That way, the group can ensure it’s compliant with various anti-competition guidelines around the world, the IFRS spokesperson said.

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The effectiveness of the GOP campaign to cajole Wall Street into tip-toeing around climate policies was underlined again this month, when Vanguard Group Inc. withdrew from the world’s biggest climate finance alliance. Not long after, it was excused from a grilling by Republican lawmakers in Texas targeting Wall Street firms they see as pro-climate.

But lawyers advising the finance industry say firms might be better off looking past GOP attacks and instead bracing for the bigger legal risk stemming from inadequate climate strategies.

“For all the talk of antitrust risk,” the bigger concern “flows from not acting in ESG friendly ways, not taking account of climate risk, not adequately preparing for the energy transition and not having a credible pathway to net zero,” Tom Cummins, a partner at law firm Ashurst, said in an interview. “From a litigation perspective, there has been a lot more activity and focus on claims against institutions for failing to take climate seriously.”

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Chong S. Park, a partner at Ropes & Gray LLP, said that GOP investigations into the pro-climate actions of firms on antitrust and consumer protection grounds are unlikely to succeed. And that’s in large part because the notion of a “group boycott” of fossil fuels is undermined by the fact that banks and asset managers continue to finance oil, gas and coal companies, he said.

ClientEarth, a group that this year successfully sued the UK government for making net-zero statements that didn’t stack up, is shifting its focus and will next year start targeting the finance industry.

“There is a real issue in how financial institutions’ continued support for polluting industries is compatible with their climate promises and best available science, the fiduciary duties of their directors, prudent management of climate risks and shareholder expectations,” said  Megan Clay, lawyer and finance lead at ClientEarth. 

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Since its defection from the Net Zero Asset Managers initiative, Vanguard has faced a wave of indignation from climate activists. The firm has tried to reassure stakeholders that it still cares about the climate, and promised to “keep investors informed of our approach through thoughtful insights such as our climate research.” The firm also said it intends to engage with portfolio companies and policymakers, and will continue to provide stewardship reports and regular climate reports. 

But such statements seem at odds with Vanguard’s record on climate finance. It committed a smaller share of its managed funds to net zero than any other NZAMi member, with about 96% of its business ignoring emissions goals. 

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For now, though, Vanguard’s decision to walk out of the net-zero alliance has been rewarded by Republicans, with lawmakers in Texas excluding the firm from an interrogation centered on ESG investing strategies. Executives from BlackRock, NZAMi’s largest member and the world’s biggest asset manager, were summoned to testify. 

And no matter the legal risks, Wall Street firms suspected of “ESG collusion” stand to lose business in Republican states. BlackRock has already had contracts withdrawn, with Florida and Texas proving particularly hostile to the firm’s stated commitment to ESG.

The net-zero coalition that Vanguard left has acknowledged that members face a challenging political and regulatory environment, but said there’s no evidence the alliance is about to “splinter.”

Each member has “to act within their own fiduciary duty, but I think most will stay,” said Kirsten Snow Spalding, vice president of the Ceres Investor Network, a founding partner of the NZAMi. 

“Vanguard is acting politically,” she said. But its defection won’t prompt other members “to leave en masse.” In fact, the coalition is being approached by asset managers who are now interested in joining the group, she said. 

—With assistance from Saijel Kishan.