Six big US banks quit net zero alliance before Trump inauguration

The six biggest banks in the US have all quit the global banking industry’s net zero target-setting group, with the imminent inauguration of Donald Trump as president expected to bring political backlash against climate action.

JP Morgan is the latest to withdraw from the UN-sponsored net zero banking alliance (NZBA), following Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs. All six have left since the start of December.

Analysts have said the withdrawals are an attempt to head off “anti-woke” attacks from rightwing US politicians, which are expected to escalate when Trump is sworn in as the country’s 47th president in just under a fortnight.

Trump’s vows to deregulate the energy sector, dismantle environmental rules and “drill, baby, drill”, were a big part of his campaign platform and are expected to form a key part of his blueprint for governing the US, the world’s biggest oil and gas producer.

Paddy McCully, a senior analyst at the campaign group Reclaim Finance, said: “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.

“A few years ago, when climate change was at the front of the political agenda, the banks were keen to boast of their commitments to act on climate. Now that the political pendulum has swung in the other direction, suddenly acting on climate does not seem so important for the Wall Street lenders.”

Convened by the UN Environment Programme finance initiative but led by banks, the NZBA commits members to align their lending, investment and capital markets activities with net zero greenhouse gas emissions by 2050 or earlier.

Citigroup was one of NZBA’s founding members. A spokesperson for the bank said Citigroup’s decision to quit would allow it to “focus on addressing barriers to mobilising capital to emerging markets in support of the low-carbon transition”.

“We remain committed to reaching net zero and continue to be transparent about our progress,” the bank said.

Addressing its withdrawal, JP Morgan said it would “work independently to advance the interests of our firm” and its customers and shareholders, while remaining “focused on pragmatic solutions to help further low-carbon technologies while advancing energy security”.

A spokesperson for Goldman Sachs said the bank was “very focused” on increasingly stringent standards and reporting requirements imposed by regulators, and insisted the bank had “made significant progress … on the firm’s net zero goals”.

Wells Fargo commented only to confirm its withdrawal from the alliance, while Bank of America and Morgan Stanley did not respond to requests for comment.

Toby Kwan, a senior manager at the Carbon Trust, said the banks’ withdrawals from NZBA could give them more flexibility over which sectors they decided to include in their targets and which pathway to align with, and less stringent timeframes to work to.

Financial institutions’ membership of net zero alliances has come under attack from politicians on the country’s right. In 2022 a potential anti-trust legal action led by attorneys general in Republican states had led some US banks to threaten to leave the NZBA, with withdrawals avoided after the group made changes to guidelines that could be construed as requirements to take action on fossil fuels.

Then in November, a group of states led by Texas sued BlackRock, Vanguard and State Street, all large asset management firms, for adopting pro-climate policies to reduce reliance on coal that the claimants alleged had pushed up energy prices.

Most recently, in December, the Republican-led judiciary committee of the House of Representatives, the US Congress’s lower house, accused “a cartel” of financial firms and climate activists of colluding to “impose radical ESG-goals” on US companies.

From Tuesday, after the US banks’ exodus, the NZBA still counted 141 banks among its members, including all the largest European banks. McCully said the departure of the US banks would give those remaining the opportunity to go further. He said: “By strengthening their commitments, NZBA banks can demonstrate that they have not simply used US obstructionism as an excuse to maintain the NZBA’s weak position.”

Kwan said the loss of the US banks was by no means a death knell for the NZBA. “While these major financial institutions leaving the alliance raises a question mark on the future of climate action in the financial sector, the remaining NZBA members represent a significant portion of the global banking sector, controlling approximately 40% of global banking assets, or $64tn [£51tn],” she said. “This substantial influence cannot be understated, and NZBA members can drive the transition to a net zero economy.”

The NZBA did not comment.