Last week, as flames began tearing through greater Los Angeles, claiming multiple lives and forcing more than 100,000 people to evacuate, JP Morgan became the sixth major US bank to quit the Net Zero Banking Alliance (NZBA) since the start of December. A smaller story, certainly, but the departure of top US banks from the NZBA in the weeks since Donald Trump’s re-election nonetheless speaks to a seismic political shift prompting major financial institutions to turn away from the climate-related commitments they made in the optimistic years after the Paris agreement.
The NZBA is a voluntary network of global banks committed to “align lending and investment portfolios with net zero emissions by 2050”. It is part of the umbrella Glasgow Financial Alliance for Net Zero (GFANZ), which counts among its membership dozens of “alliances” covering the various segments of global finance. For its part, the NZBA requires new members to submit science-aligned targets within 18 months of joining, alongside disclosing plans for and status updates on meeting them.
At its height, the coalition boasted 40% of global banking assets. And at the time of its launch, its co-founder, the former Bank of England governor Mark Carney, described the NZBA as the “breakthrough in mainstreaming climate finance the world needs”.
So far a breakthrough remains at large. In evaluating the NZBA, the benchmark that ultimately matters is that of curbing global emissions and fossil fuel expansion. On both of these points, it’s not clear that the alliance has had any effect. Banks’ targets have been met with widespread criticism concerning lack of transparency and inconsistent or questionable methodologies, and recent research shows little to no difference between the financing and engagement impact of NZBA members and non-members. A separate study found banks that self-present as eco-conscious lend more to polluting industries than those that don’t. Impressively, there has been an overall uptick in fossil fuel financing since 2021 – after the group was formed.
But this raises a critical question: if these alliances were voluntary, non-binding, and seem to have done close to nothing to hinder banks financing fossil fuel expansion, why are banks bothering to quit?
The answer is always, in finance, a calculus of risk. At the time of NZBA’s founding, banks faced considerable reputational risk for being seen as climate laggards. The wind was in the sails of governments and institutions touting climate action, and banks acted accordingly. Today, on the back of record fossil fuel profitability, a protracted backlash against “woke capital” and the second coming of Trump, the calculus has changed.
The mood music on Wall Street is the threat of litigation for being seen as anti-Big Fossil. Weeks after Trump’s re-election, the “big three” asset managers – BlackRock, Vanguard and State Street – were sued by a Texas-led coalition ostensibly for using climate strategies to crush coal production in an alleged breach of antitrust law. In a series of publications in 2024, the Republican-led House judiciary committee claimed it had evidence of a “climate cartel” among big financial firms, criticising GFANZ and Climate Action 100+, another voluntary alliance, for encouraging investors to use their position as shareholders to push companies to disclose their emissions and set climate plans – which, according to the committee, amounts to “collusion”. It’s unclear what the conclusions of these reports mean for implicated firms, but the implied – and chilling – threat is one of legal action for breaching antitrust laws.
Even without that thread, however, parties hostile to the green finance wave have found avenues for applying pressure: the asset management giant BlackRock, having previously made considerable efforts to pitch itself as a climate leader, left its equivalent alliance to the NZBA, the Net Zero Asset Managers initiative, last week, after the loss of billions in public pension assets from red states that attacked the firm as too environment and sustainability minded.
What, then, should we make of this gradual crumbling of the “sustainable finance” infrastructure? As Daniela Gabor, a professor of economics, has argued, the prominence of the agenda after the Paris agreement might best be read as an effort by the private sector to weaken a groundswell in public demand for climate action by governments, heading off the threat of stricter regulation and ensuring that the “big green state” remains squarely focused on “mobilising” private capital rather than investing directly itself – even if this approach might be more costly and less effective. Optimistically, the faltering of the project could therefore create new openings for more ambitious and effective policy.
However, this was always an agenda that was equally attractive to governments. Private sector alliances such as GFANZ reflect a view of climate policy as technocratic exercise – crowding in finance here, de-risking a carbon capture project there. Treating it as such allowed governments to dodge the thornier issues of climate policy, from its direct relationship to economic inequality and outsized corporate power, to confronting the entrenched interests of the fossil fuel industry – whether through unwinding trillions in annual subsidies or directly regulating against fossil fuel expansion.
As Hans Stegeman, the chief economist at Triodos Bank, put it to me: “For too long, policymakers have placed excessive hope in private finance to resolve issues they hesitate to address through regulation or public policy.” As the climate crisis accelerates and increasingly far-right politicians make gains around the world – often on platforms that rally against the apparent elitism of climate politics – ignoring these issues is no longer a viable strategy.
In a statement published on 31 December, GFANZ announced it would drop its requirements for members to publish firm targets, allowing “any financial institution working to mobilise capital and lower the barriers to financing energy transition to participate”. For an alliance that retains many prominent European banks within its ranks, the crumbling to pressure was remarkably swift. More cynically, it might be read as an admission that all these “targets” and “disclosures” never meant much at all.
Adrienne Buller is director of The Break Down and the author of The Value of a Whale: on the illusions of green capitalism
