In a striking shift, several of Wall Street’s biggest banks are stepping away from the United Nations-backed Net Zero Banking Alliance (NZBA) amid Donald Trump’s return to the White House.
Morgan Stanley joined Citigroup, Bank of America, Wells Fargo, and Goldman Sachs, which exited the alliance earlier in 2024. This move raises questions about global climate commitments and the implications of US political shifts on such initiatives.
While many of these banks insist that their commitment to net-zero goals remains intact, the coordinated withdrawals suggest a deeper tension between corporate climate action and escalating Republican criticism of environmental, social, and governance (ESG) policies, often dismissed by the GOP as “woke investing.”
The “Woke” Investing Debate
Two key Republican figures, including Rep. Jim Jordan, have been outspoken against climate finance equity coalitions such as the NZBA. Jordan, who previously led the House Judiciary Committee, has accused such efforts of being a “climate cartel” attempting to ‘conspire’ against the American economy.
Conservative opponents of ESG, in particular, have begun terming such measures as “woke investing” to counter free-market economy principles. Jordan’s struggle to defend Republican internationalism has become increasingly difficult.
Jordan has become more associated with Climate Action 100+ than with his arguments against the withdrawal of these banks. The “market stuffing internationalism” that the GOP appeared calm about throughout much of 2020-2021 was beginning to unravel. Recently, particularly according to Jordan’s rhetoric, more and more international elites are leaving the United States.
Donald Trump’s administration is likely to strengthen the belief in eliminating all ESG initiatives and may target the NZBA like the US withdrawal from the Paris Climate Accord in 2017. This would likely weaken the alliance’s influence, as Wall Street continues to hold significant power within global finance.
Banks’ Rationale For Exiting The NZBA
The banks that have left the NZBA maintain that they remain committed to their climate goals. For example, Morgan Stanley stated, “Our commitment to net-zero is unchanged as ever,” while Citigroup emphasised their progress toward climate goals.
These statements suggest a complex picture—though these banks are withdrawing from the NZBA, they are not pulling out of their climate commitments.
The NZBA, initiated in 2021 as part of the Glasgow Financial Alliance for Net Zero, facilitated banks in their efforts to sign up for net-zero emissions by a specific date, as outlined in the Paris Agreement.
However, increasing political pressure, particularly from Republican lawmakers, has made it more challenging for banks to remain active members.
Recently, the alliance amended its terms by removing the requirement for members to comply with the goals of the Paris Agreement. This change was likely an effort to maintain participation in a rapidly changing political climate, but it may have come too late for many American banks.
The Shadow Of Trump 2.0
The future of the NZBA seems to be shadowed by the ideologies of Donald Trump’s administration. We all remember their disheartening approach to international climate change during his presidency.
Since the return of Donald Trump to the White House, the NZBA is facing a risk of being dismantled, undoing the strides made by financial institutions over the years toward climate integration.
However, that is not the sole concern. While business integration is crucial for the success of the NZBA, it is also important to note that all members join voluntarily. This raises red flags, as political interference or changes remain a constant threat.
Critics of the agreement, who accuse it of being an example of global elites trying to impose their will on everyone, may undermine its credibility and, by extension, the influence Wall Street still holds.
For banks like Citigroup and Bank of America, leaving the NZBA while maintaining other climate affiliations reflects a calculated effort to navigate polarised political waters. Both institutions remain part of the broader Glasgow Financial Alliance for Net Zero, which includes coalitions of asset managers and insurers. This selective participation allows banks to signal their ongoing climate commitment without inciting the ire of Republican lawmakers.
However, the broader implications for global climate action are troubling. The NZBA was designed to unify financial institutions around common goals, leveraging their collective influence to accelerate decarbonisation. Its fragmentation could slow progress and embolden other critics of ESG initiatives worldwide.
The Road Ahead For NZBA
With several high-profile US banks exiting, the NZBA faces an uncertain future. While some members, particularly those outside the United States, may continue to champion its goals, the alliance’s ability to drive meaningful change will likely be diminished without Wall Street’s participation. Efforts to loosen participation requirements may keep remaining members on board, but they also risk diluting the NZBA’s impact.
With Donald Trump in charge now, the US government’s stance on climate finance could shift dramatically, potentially undermining not only the NZBA but also other international climate initiatives. For now, the alliance’s survival hinges on its ability to adapt to a rapidly changing political landscape and retain the support of its remaining members.
NZBA’s future—and that of global climate finance—hangs in the balance. Whether the alliance can weather this storm remains to be seen, but its struggles offer a stark reminder of the fragile nature of voluntary global initiatives in the face of domestic political shifts.