Major US Banks Exit Net Zero Alliance Ahead of Trump Presidency
The six largest banks in the United States have exited the Net Zero Banking Alliance (NZBA), a global initiative aimed at aligning financial activities with net zero carbon emissions by 2050. The withdrawals, which began in early December, come just weeks before Donald Trump’s inauguration as the 47th president, a move analysts suggest is driven by anticipated political backlash against climate action.
The Banks Stepping Back
JP Morgan, the most recent to leave, joins Citigroup, Bank of America, Morgan Stanley, Wells Fargo, and Goldman Sachs in stepping away from the UN-sponsored NZBA. Citigroup, a founding member of the alliance, emphasized that the decision allows the bank to focus on addressing challenges in mobilizing capital for low-carbon transitions in emerging markets. “We remain committed to reaching net zero and continue to be transparent about our progress,” a Citigroup spokesperson stated.
Similarly, JP Morgan affirmed its commitment to advancing low-carbon technologies independently. “We will work pragmatically to further low-carbon technologies while advancing energy security,” the bank noted. Goldman Sachs and Wells Fargo echoed similar sentiments but cited regulatory and reporting challenges as factors in their decision. Bank of America and Morgan Stanley declined to comment.
Political and Strategic Factors
Paddy McCully, a senior analyst at Reclaim Finance, criticized the move as politically motivated. “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,” McCully said, pointing to the banks’ earlier enthusiasm for climate commitments when climate change was a political priority.
Trump’s campaign promises to deregulate the energy sector and prioritize fossil fuel production have created an environment where climate commitments face increasing scrutiny. His administration’s blueprint for governance includes significant rollbacks of environmental regulations, fostering an economic agenda centered on energy independence.
Implications for the NZBA and Global Climate Finance
The NZBA, convened by the UN Environment Programme’s finance initiative, now counts 141 member banks globally, including Europe’s largest financial institutions. Toby Kwan of the Carbon Trust noted that while the exit of US banks represents a setback, it does not signify the end of the alliance. “Remaining NZBA members control 40% of global banking assets, representing $64 trillion, and can still drive the transition to a net zero economy,” Kwan said.
Kwan also highlighted that the departure gives the remaining members flexibility to strengthen their commitments, free from US opposition. “This is an opportunity for NZBA banks to demonstrate leadership in advancing robust climate goals,” she added.
A Growing Backlash Against ESG Goals
US banks’ participation in net zero initiatives has faced growing resistance from Republican politicians. In 2022, Republican-led states threatened legal action over perceived anti-fossil fuel stances, forcing banks to reevaluate their positions. Most recently, a Congressional committee accused financial firms and activists of colluding to impose radical Environmental, Social, and Governance (ESG) goals on US businesses, further intensifying the scrutiny.
Despite these challenges, McCully urged the remaining NZBA members to stay the course. “By strengthening their commitments, NZBA banks can show that they are not deterred by US obstructionism and are serious about driving global climate action,” he stated.
While the departure of major US banks raises questions about the future of climate action in the financial sector, the NZBA’s influence remains substantial. The alliance continues to play a critical role in steering global finance toward net zero goals, even as geopolitical and domestic pressures reshape the landscape of climate commitments.
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