Major US Banks Abandon Net Zero Commitment as Political Climate Shifts

In a seismic shift within the financial sector, the six largest banks in the United States—JP Morgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo, and Goldman Sachs—have dramatically withdrawn from the United Nations-sponsored Net Zero Banking Alliance (NZBA). This wave of exits is notably timed with the upcoming inauguration of Donald Trump as president, heralding fears of a more hostile environment for climate action in the US.

The NZBA, designed to help banks align their lending and investment practices with the goal of achieving net zero greenhouse gas emissions by 2050, is seeing its membership dwindle as this political landscape evolves. The timing of these withdrawals has raised eyebrows, with analysts suggesting that the banks are preemptively shielding themselves from potential backlash from Trump and his allies, who have expressed skepticism towards climate-focused initiatives.

Paddy McCully, a senior analyst at Reclaim Finance, criticized the banks for their apparent abandonment of climate commitments, stating, “The sudden exodus of these big US banks out of the NZBA is a lily-livered effort to avoid criticism from Trump and his climate denialist cronies.” As climate change has shifted in public and political focus, these financial institutions now seem less inclined to uphold their previous pledges to address environmental concerns.

Despite Citigroup being a founding member of the NZBA, they stated their exit will allow them to concentrate on removing barriers for capital mobilization towards emerging markets that support a low-carbon transition. JP Morgan emphasized its intention to pursue independent strategies that prioritize the needs of their clients and shareholders while striving for energy security and promoting low-carbon technologies.

Goldman Sachs also maintained that they are dedicated to meeting stringent environmental standards and achieving their net zero goals, while Wells Fargo confirmed its withdrawal without further comment. Meanwhile, Bank of America and Morgan Stanley did not provide any insight regarding their exits.

The departure of these major US banks comes at a time when the advocacy for climate action within the financial sector faces increasing scrutiny. Previous pressures from Republican state attorneys general have led some banks to consider withdrawing from the NZBA earlier when proposed anti-trust actions against firms adopting pro-climate policies emerged. Additionally, in a controversial move, a group of Republican-led states filed suit against major asset management firms like BlackRock and Vanguard, alleging that their climate policies contribute to rising energy prices.

Despite the turmoil, the NZBA is not finished: it still holds membership with 141 banks, including major European institutions. Experts believe that the enduring commitment of remaining members can help galvanize stronger climate actions, providing an opportunity to further their objectives. As Toby Kwan from the Carbon Trust pointed out, while the exodus of US banks raises questions about the future of climate action in the financial sector, the remaining NZBA members control approximately 40% of global banking assets—around $64 trillion. This substantial weight can still mobilize efforts towards a net zero economy.

In summary, as US banks pivot away from international climate commitments amidst a changing political atmosphere, the question looms: will this shift signal a dramatic retreat from climate responsibility, or could it serve as a catalyst for remaining global banks to strengthen their resolve in fighting climate change? Stay tuned as this unfolding story continues to shape the future of sustainable finance.