ADVERTISEMENTBefore Trump signed the order to exit the Paris Agreement, six of the biggest banks in North America pulled out of the Net Zero Banking Alliance (NZBA).
Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo all announced that they would be leaving the coalition in December 2024 and early January.
In late January, a number of Canadian banks followed their US counterparts. Five of the country’s top banks – TD Bank, Bank of Montreal, National Bank of Canada, Canadian Imperial Bank of Commerce and Scotiabank – also left the alliance.
These departures have left many questions about the future of banking’s climate ambitions. While 135 financial institutions remain in the alliance – including all of Europe’s major banks – it’s unclear how it will now move forward.
What is the Net Zero Banking Alliance and why are banks leaving it?
The NZBA is a group of leading global banks committed to aligning their lending, investment and capital markets activities with net-zero greenhouse gas emissions by 2050.
Launched in 2021 with 43 founding members, NBZA was convened by the UN Environment Programme’s finance initiative but is led by the banks themselves. Citigroup, one of the major US banks to exit the alliance, was one of these founding members.
Paddy McCully, senior analyst at NGO Reclaim Finance, says the spread of “Trumpism” – even before his reelection – is to blame. This hostile political climate has put particular pressure on US firms to leave the alliance, while Canadian institutions with widespread US presence are also vulnerable.
“State-level attorneys general have been launching various threats against banks and investors if they make any noise or indicate concerns about climate change, or suggest they might do anything about it,” he explains.
Legal threats came from attorneys general in Republican states, who claimed the coalition was in breach of competition laws. It pushed some major banks to the brink of leaving in 2022. Instead, the NZBA clarified that none of their recommendations were compulsory and they stayed.
“The big banks at least had held off against these attacks and they remained part of the NZBA despite the right-wing criticising them for it,” says McCully.
“But obviously the straw that sort of broke the camel’s back was Trump getting elected and realising that the attacks were going to intensify.”
Though the rise of ‘Trumpism’ may have been the main cause of this upset in climate finance, it hardly comes as a surprise. Many of these major banks had already been delaying concrete climate action.
Are European banks also going to leave the industry climate alliance?
Despite the departure of their American peers, European banks appear to still be backing the NZBA. Several have already declared their intention to remain committed to the industry coalition.
Slawomir Krupa, chief executive of Societe Generale, said at a press conference last Thursday that the French bank is “not planning to leave”. Earlier in the week, the CEO of Credit Agricole Philippe Brassac also said that it would remain a member of NZBA stating that the “climate emergency has never been so strong”.
Krupa added that the exit of their American peers had given European banks “the opportunity to have a deep dialogue on a complex topic to better understand our direct but also indirect emissions”.
ADVERTISEMENTFor those more ambitious European members of the alliance, it could even provide an opportunity to act and increase the ambition of the NZBA.
Will a weaker banking climate alliance impact existing climate action?
A consistent lack of action from banks that were members of the alliance puts the US mass exodus into perspective. Their exit does little to change the material reality of banks’ climate commitments – or lack thereof.
The policies of every bank that has left so far were already deeply insufficient for the goal of aligning their activities with net zero by 2050. And 10 of them were among the top 21 fossil fuel financiers since the Paris Agreement, according to the Banking on Climate Chaos report.
JPMorgan Chase alone provided nearly $41 billion (€39.5 billion) in finance for coal, oil and gas companies in 2023.
ADVERTISEMENTMcCully says the Canadian banks were also “just about the worst” in terms of climate commitments under the NZBA. “It wasn’t a huge deal for them to pull out given that they didn’t really want to be there.”
This reticence to commit or act has been holding back other, more ambitious members of the alliance. Three European banks – Société Générale, BNP Paribas and Crédit Agricole – more than halved their fossil fuel financing between 2020 and 2023. None of the policies or changes that resulted in these cuts came as a direct result of their NZBA membership.
Triodos, an ethical bank based in the Netherlands, is one of the more progressive NZBA members. It has long been calling for the coalition to be more ambitious with its commitments.
The ethical bank views the exodus as an opportunity for the remaining members to do more – now that they are not being held back by their American counterparts.
ADVERTISEMENT“Their departure is distressing because it reduces our scope for action, but it also provides an opportunity for a strong ‘coalition of the willing’ to take the NZBA forward and show what climate action really looks like,” chief commercial officer and member of Triodos’s executive board Jacco Minnaar writes in an article on the bank’s website.
Previously, he says, seemingly more committed banks ran the risk of condoning the lack of action and ambition from others in the alliance. Minnaar also adds that relying solely on voluntary efforts allows policymakers to “shirk their responsibilities”.
McCully thinks the remaining members are likely to stay quiet until the dust settles. After that, however, depending on how the political winds shift across Europe and the rest of the world, there’s a window of opportunity for a positive outcome.
“European banks have said in the past they wanted more ambition but were being held back by the US banks because they were refusing to accept any more ambition and pushing to make the NZBA as weak as possible,” he explains.
ADVERTISEMENT“If those European banks were true to what they were saying 18 months ago, then they would be pushing for more ambition.”
