From Goldman Sachs (GS) to Morgan Stanley (MS), many major US banks are leaving the international climate group amid growing political pressure as the country enters Trump's second term.
First launched in April 2021, the United Nations' Net-Zero Banking Alliance (NZBA) aims to make the financial sector environmentally sustainable by bringing together banks, insurance companies and investors to set sustainability goals in line with group standards. NZBA has more than 140 member banks in 44 countries that manage $64 billion in total assets. But in recent weeks, American banks have been leaving the group in droves.
Goldman Sachs
Goldman Sachs became the first major Wall Street bank to exit the NZBA, announcing its departure on Dec. 6 without giving a reason. The move comes days after Texas Attorney General Ken Paxton sue BlackRock (BLK)Vanguard and State Street—three of the world's largest asset managers—for conspiring to manipulate energy markets. Paxton accused these institutional investors of pressuring the coal companies in which they have large shares to reduce production and tricking investors into following suit. ESG (environmental, social and governance) strategies.
On its website, Goldman Sachs remains committed to achieving net-zero carbon emissions by 2030 across its operations and supply chain. The bank said it “remains focused on the increasing sustainability standards and reporting requirements imposed by regulators around the world.”
Wells Fargo
Wells Fargo (WFC) announced his departure from the group on Dec. 20. Also, the bank did not give a reason but maintains a sustainability page on its website, which includes the goal of reducing energy consumption from 2019 levels by half before 2030.
Four days before Wells Fargo's withdrawal, a number of climate advocacy groups jointly published a letter to the NZBA about “sliding standards” for the group. “The coalition must not want to appease or accept potential defectors or stay comfortable when its members clear their intentions, because doing so undermines the purpose of the coalition and jeopardizes the goals of the world's climate,” the letter said. For example, Morgan Stanley has relaxed its target to match the Paris Agreement's warming goal of 1.5 degrees Celsius to 1.7 degrees Celsius—”a low level of ambition that requires minimal reductions by the bank,” the letter said.
Citigroup and Bank of America
Citigroup ( C ) and Bank of America ( BAC ) have both left the NZBA on the 2024 deadline. Citi said it was working to achieve its goals outside the group while Bank of America said it would continue to work with clients on environmental and merger issues. their needs.
Like their peers, Citi's net-zero goals and Bank of America's environmental sustainability commitments are regularly published on their websites. Both banks want to achieve net-zero carbon emissions in all their financing activities, operations and supply chain by 2050.
Morgan Stanley
Morgan Stanley left the NZBA on Jan. 2. The bank also did not give a reason for its defection but it maintains its internal climate policy. The bank says it has reached carbon neutrality by 2022, but is still working towards net-zero emissions, with short-term targets set for 2030.
What does it mean to go out?
Some ESG experts see migration as a major effort to comply with political pressure rather than retreat from climate commitments. “Financing sustainable initiatives is increasingly linked to long-term profitability and market demand,” Sunil Kansal, head of consulting and analytical services at ESG advisory firm Shasat, told the Observer. “The important thing is not the framework but the result. Banks will continue to drive the green transition, adapting their strategies to adapt to changing conditions. “
“These exits are not climate change. They are showing responsiveness to many factors,” Chris Pyke, chief innovation officer at the Global Real Estate Sustainability Benchmark (GRESB), told the Observer. He pointed to factors such as reporting burdens, challenging targets and—perhaps most relevant to US banks—the antitrust scrutiny from Republican lawmakers. As the country heads into Trump's second term as president, efforts to tighten environmental reporting laws are likely to falter given his anti-lawyer stance.
