Climate Action in Jeopardy as Top US Banks Abandon Net-Zero Alliance
The world’s top banking sector climate coalition, the Net-Zero Banking Alliance (NZBA), has been dealt a significant blow as major US lenders, including Goldman Sachs, Wells Fargo, Citi, Bank of America, and Morgan Stanley, have abruptly exited the group. This mass exodus has sparked concerns that the industry is losing its commitment to tackling fossil fuels and transitioning to a low-carbon economy.
A Shift in Priorities
The departure of these banking giants has left JPMorgan as the only major US bank remaining in the NZBA. This raises questions about the industry’s resolve to address climate change, particularly given the significant role these banks play in financing fossil fuel companies. According to a recent study, the six largest US banks are among the top 20 global lenders to fossil fuel companies.
Antitrust Concerns and Political Pressure
The exit of these banks is largely attributed to warnings from Republican politicians that membership in the NZBA could breach antitrust rules. This political pressure, combined with a two-year-long backlash against environment, social, and governance (ESG) investing, has created an unfavorable environment for banks to commit to climate action.
Weakening Climate Commitments
Experts warn that the departing banks may now reduce their commitments to climate-friendly policies, potentially weakening their existing targets and emissions reduction goals. While banks have avoided citing a direct reason for their exit, their actions suggest a shift in priorities away from climate action.
A Call to Action for European Banks
The NZBA still boasts 142 members from 44 countries, with $64 trillion in assets. However, the exit of US banks presents an opportunity for European banks to take a more ambitious approach to climate action. As Patrick McCully, senior analyst for energy transition at Reclaim Finance, notes, “European banks have complained that they’d love the NZBA guidelines to be stronger, but the US members just won’t let it happen – so now it’s time for the Europeans to step up and show that they weren’t just using US obstructionism as an excuse for foot-dragging.”
The Road Ahead
Despite the setbacks, investors and advocacy groups remain committed to pushing banks to prioritize climate action. As Mindy Lubber, chief executive of non-profit Ceres, emphasizes, “Ceres will continue supporting banks as they set and achieve targets and implement transition plans. Banks are key to supporting the global goal of net zero emissions and to the economic opportunities that are arising from the transition.”
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