In a surprising turn of events, the world of finance is experiencing what can only be described as a "silent quitting" from climate initiatives. Major banks and asset managers are stepping away from the Net Zero Banking Alliance (NZBA) and Net Zero Asset Managers (NZAM) initiative, two cornerstone programs aimed at aligning the financial sector with global climate goals.
Let's rewind a bit. The NZBA, launched in April 2021, was a big deal. It brought together banks from around the world, all pledging to achieve net-zero greenhouse gas emissions in their lending and investment portfolios by 2050[1]. Similarly, NZAM, kicked off in December 2020, rallied asset managers to support the goal of net-zero emissions by 2050 or sooner. These initiatives were part of a broader push to get the financial sector on board with fighting climate change.
But here's where things get interesting. Starting in December 2024 and accelerating through January 2025, we've seen a mass exodus from these alliances. It's like watching a slow-motion breakup, but instead of "it's not you, it's me," the excuse seems to be "it's not us, it's the political climate."
The Departures
The departures read like a who's who of Wall Street. Goldman Sachs, Wells Fargo, Citigroup, Bank of America, and Morgan Stanley all said goodbye to NZBA in December. Not to be left out, Canada's six largest banks, including TD and RBC, also packed their bags. The cherry on top? JPMorgan Chase, the last holdout among major U.S. banks, waved farewell on January 8, 2025.
But wait, there's more! BlackRock, the world's largest asset manager, decided NZAM wasn't their cup of tea anymore and left on January 9. This prompted NZAM to hit the pause button on its activities just a few days later.
Behind the Exodus
So, what's behind this financial sector ghosting of climate initiatives? Well, it's a perfect storm of political pressure, legal worries, and good old-fashioned profit concerns.
The elephant in the room is the election of Donald Trump in November 2024. Trump's stance on climate change is about as subtle as a bull in a china shop. He's dismissed climate action as a "hoax" and is all about fossil fuels. In fact, he's revived the catchy slogan "Drill, baby, drill" to sum up his energy policy. This shift in the political winds has banks scrambling to realign with the new administration's agenda.
Then there's the legal headache. Republican-led states have been giving banks the side-eye, suggesting that these climate alliances might be breaking antitrust laws. It's enough to make any corporate lawyer break out in a cold sweat.
Let's not forget about the bottom line. With Trump's policies likely to favor oil and gas, banks are doing the math and realizing that green projects might not be as profitable as they once thought. It's a classic case of following the money.
The Impact
The consequences of this climate coalition crumble are significant. NZBA's total assets under management took a 22% hit after the U.S. and Canadian exits. NZAM's suspension leaves a leadership vacuum in climate coordination among asset managers. It's like watching the captain and first mate jump ship just as the voyage was getting interesting.
This retreat raises some big questions about the future of climate finance. Will European banks step up to fill the void left by their American counterparts? Can these initiatives survive without Wall Street's heavy hitters? And perhaps most importantly, what does this mean for our global efforts to combat climate change?
Looking Forward
As we watch this drama unfold, one thing is clear: the relationship between finance and climate action is as volatile as the stock market itself. The silent quitting of the finance sector from these climate initiatives might just be the canary in the coal mine, signaling a broader shift in how businesses approach environmental responsibilities in an ever-changing political landscape.
In the end, this exodus serves as a stark reminder of how deeply intertwined our financial systems are with political realities. As we move forward, the challenge will be finding a way to make climate action resilient to these shifts, ensuring that our planet's future isn't left to the whims of election cycles and quarterly profit reports.
[1] Net Zero Banking Alliance (NZBA) was launched in April 2021 as part of the Glasgow Financial Alliance for Net Zero (GFANZ).