Pressure builds: A couple walks past a BofA signage. According to data, banks have collectively stepped up their financing of the fossil-fuel industry since the alliance was formed in 2021. — Bloomberg
NEW YORK: Within the span of a month, Wall Street’s biggest banks have quit what had been one of the most popular clubs inside global finance.
The Net-Zero Banking Alliance (NZBA) – a group dedicated to helping lenders reduce their carbon footprints – has in quick succession been abandoned by Goldman Sachs Group Inc, Wells Fargo & Co, Citigroup Inc, Bank of America (BofA) Corp and Morgan Stanley.
JPMorgan Chase & Co, the largest United States bank, looks to be next in line.
The moves reflect US banks’ desire to shield themselves from increasing political pressure as Donald Trump returns to the White House, according to people familiar with the matter who asked not to be identified discussing private deliberations.
And NZBA is bracing for more US exits, secretariat lead Sarah Kemmitt told members in a Dec 31 letter seen by Bloomberg.
She cited the “political environment”.
At the same time, the real-world impact of the NZBA defections is unclear.
According to data compiled by Bloomberg, banks have collectively stepped up their financing of the fossil-fuel industry since the alliance was formed in 2021.
Membership of NZBA was likely more a case of “virtue signalling” than “meaningful climate impacts,” said Jill Fisch, a business law professor at the University of Pennsylvania. A spokesperson for NZBA declined to comment.
Activists are now demanding that the government intervene to target Wall Street.
Environmental Advocates NY, a nonprofit, said it’s urging New York state officials to introduce regulations and laws that would compel banks operating in the world’s biggest financial hub to take climate action.
The wave of NZBA exits follows behind-the-scenes tensions that have been brewing for more than two years, Bloomberg’s reporting has shown.
In 2022, JPMorgan and Morgan Stanley were among banks pushing back against binding targets on climate finance.
NZBA then watered down some requirements, and members stayed put. But as the Republican Party grows more hostile toward climate-friendly organisations, the finance industry is repositioning itself.
Global temperatures are rising fast, yet banks continue to reap short-term profits by sticking with fossil fuel producers.
It’s therefore both “distressing and unsurprising” that Wall Street is turning it’s back on net zero alliances, said Ken Pucker, who teaches sustainability at the Fletcher School at Tufts University in Medford, Massachusetts. The alliances were created in order to encourage the finance industry to take into account the longer-term cost of supporting oil, gas and coal.
Back in 2021, when NZBA was formed, banks now leaving the alliance proudly touted their membership.
BofA chief executive officer (CEO) Brian Moynihan spoke of a “commitment to net zero” in his role as co-chair of the Sustainable Markets Initiative, whose stated mission is to “build a coordinated global effort” to help green the private sector.
And in an April 2021 statement announcing its agenda, the world’s biggest coalition for climate finance – the Glasgow Financial Alliance for Net Zero (GFANZ) – said it would “require signatories to set science-aligned interim and long-term goals to reach net zero no later than 2050”.
GFANZ ended 2024 by recalibrating its mission as banks flee and the Republican Party (GOP) attacks intensify. The group is distancing itself from the net zero alliances for which it had previously been an umbrella organisation.
Going forward, GFANZ will make its guidance available to financial firms, whether they’ve committed to a net zero alliance or not.
A spokesperson for GFANZ declined to comment beyond the group’s public statements.
Banks that sign up to NZBA still commit to transition their financed emissions to align with “pathways to net zero by 2050” at the latest, according to its website.
They’re also required to provide 2030 targets to show they’re on track, and to document their progress.
All banks exiting NZBA have made public statements to say they still recognise decarbonisation as a worthy goal. But they’ve also made clear that their biggest duty is to serve the needs of their clients. None has provided an official reason for quitting the alliance.
Wall Street is now navigating a world in which bankers and money managers suspected of being unsupportive of the GOP’s pro-fossil fuel agenda face a growing threat of litigation.
Just weeks after Trump was re-elected in November, Texas led a move to sue BlackRock Inc, Vanguard Group Inc and State Street Corp for allegedly breaching antitrust laws by adopting pro-climate strategies to suppress coal production.
Then in December, the GOP-led House Judiciary Committee said it found “substantial evidence that a climate cartel of financial institutions” had engaged in “anticompetitive collusion” by demanding that companies “disclose, reduce and enforce” their net zero climate commitments.
The committee, which is led by Ohio Republican Jim Jordan, singled out GFANZ and similar groups for leading what it described as a climate crusade.
GOP members have made clear they feel increasingly emboldened.
After hearing of the defections from NZBA, Republican Congressman-elect Riley Moore of West Virginia said via a spokesperson that he will keep trying to ban and block financial firms suspected of supporting “anti-fossil fuel environmental, social and governance policies”.
Meanwhile, Wall Street firms continue to earn considerably more from arranging fossil-fuel deals than their European counterparts.
Last year, JPMorgan topped the league table of banks underwriting bonds and loans for oil, gas and coal companies, according to data compiled by Bloomberg.
It was followed by Wells Fargo, TD Securities, BofA, RBC Capital Markets and Citigroup. The biggest underwriter of green bonds, meanwhile, was BNP Paribas SA, which is the largest bank in the European Union. — Bloomberg
