Big bank exodus from climate alliance chided as ‘disgraceful’

Morgan Stanley, Goldman Sachs, Wells Fargo, Citibank and Bank of America in the past month have all dropped out of an ambitious, United Nations-supported alliance of banks committing to reach net zero climate emissions by 2050.

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Their exodus from the Net-Zero Banking Alliance (NZBA) is calling into question the future of its umbrella group, the Glasgow Financial Alliance for Net Zero (GFANZ). Critics fear it is backsliding on an original focus to keep investments in line with the Paris Agreement and phase out support for fossil fuel projects.

The decision by some of the biggest financial services companies in the world to leave the alliance underscores a growing backlash globally of climate efforts, particularly as U.S. president-elect Donald Trump, a critic of climate change efforts, is preparing to return to the White House. Climate activists worry that the original intent of the Glasgow Alliance is quickly softening with deep repercussions.

In April 2021, Mark Carney, then the COP 26 president, founded the Glasgow alliance. The launch made a splash, with 450 financial institutions promising to move more than $100 trillion toward climate finance by 2050. GFANZ oversaw the banking alliance, which involved 145 banks in more than 40 countries with a combined total of more than $70 trillion in assets.

However, GFANZ on Jan. 2 shared a new year update that declared a new core focus “to help unlock $5 trillion” to support low-carbon energy and economic transitions in emerging markets and developing economies. 

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Carney, the UN special envoy for climate action and finance, serves as GFANZ co-chair alongside former New York City Mayor and entrepreneur Michael Bloomberg. The vice chair is Mary Schapiro, former chair of the U.S. Securities and Exchange Commission.

Harsh words from climate activists

“America’s largest banks are making a New Year’s resolution to turn back on their climate promises, disgracefully ending 2024 — a year marred by continued bank funding for fossil fuel expansion and policy backtracking — by exiting the Net Zero Banking Alliance for Net Zero (NZBA),” stated Rainforest Action Network Bank Engagement and Policy Lead Allison Fajans-Turner.

JPMorgan Chase, Citigroup and Bank of America are the world’s top three banks financing fossil fuels in 2023, according to the Banking on Climate Chaos Report 2024, produced by groups including the Rainforest Action Network, Sierra Club and the Indigenous Environmental Network.

The London nonprofit ShareAction “cautiously welcomed” GFANZ’ new focus on “addressing barriers to mobilizing capital.”  

“However, GFANZ’s decision to walk back on a requirement to align with the Paris Agreement is a dangerous one, which could lead to its members lowering ambition even as climate change impacts like extreme weather are harming communities around the world,” said Jeanne Martin, the head of ShareAction’s banking program.

Winds of change

The shift comes ahead of Trump’s second presidency and amid a political backlash in the U.S. against environmental, social and governance efforts by corporations.

Banks also faced specific challenges to participate in the NZBA, including how to address the role of carbon credits, harmonize emissions reporting, and satisfy climate regulations across different jurisdictions.

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After several US banking giants left the net-zero alliance, GFANZ leadership shared a brief update on Dec. 31 that it would “allow any financial institution working to mobilize capital and lower the barriers to financing energy transition to participate.” 

None of the banks explained their motivations for leaving the alliance, despite plans to maintain their individual net zero goals:

In April 2024, the GFANZ group the Net Zero Insurance Alliance (NZIA) dissolved after a series of members departed.

GFANZ had attracted fanfare as well as suspicion early on, not only over the sincerity of big banks that bankroll the fossil fuel industry, but also about their ability to coalesce around varied net zero goals. 

“GFANZ is focused on developing the building blocks for a financial system capable of financing the transition to net zero,” according to its website. Three main focus areas include developing new financial tools to support decarbonization, getting capital flowing to emerging markets and developing economies, and driving policies to stimulate climate finance “while driving economic growth”.

In August 2022 the group drafted a 140-page report, “Measuring Portfolio Alignment”, specifically exploring how banks could align their investments with the Paris Agreement’s goals to limit the global temperature rise. That was developed with input from 24 banks and organizations, including recent departures Bank of America and Wells Fargo.