“The end of net zero”: on Wall Street, banks are renouncing their commitments to green finance

During the month of December, four of the major US financial institutions (Goldman Sachs, Wells Fargo, Citigroup and Bank of America) left the Net-Zero Banking Alliance (NZBA), an initiative launched by the United Nations in April 2021 in the part of the Glasgow Financial Alliance for Net Zero. Yesterday, Thursday January 2, Morgan Stanley also ended its membership .

• The NZBA is a group of banks that have signed a commitment to align their loan and investment portfolios on a trajectory to achieve net zero emissions by 2050.
• Before this wave of departures, the Alliance brought together 144 banks which represented more than 40% of global banking assets. This is mainly dominated by European banks, which last year represented 48.5% of total assets managed by NZBA members. .

Why this sudden wave of departures, a few days before the inauguration of Donald Trump on January 20?

• American banks fear that Trump’s return to power with a Republican majority Congress at his disposal will lead to increased pressure on them because of their commitments to the green transition.
• In November, 11 Republican states filed suit against three asset managers (BlackRock, Vanguard and State Street), accusing them of “forming a union and agreeing to use their collective stakes in coal companies listed on the stock exchange in order to induce sector-wide production reductions » .

The involvement of American financial institutions in financing the transition was the subject of numerous Republican attacks during the 2024 presidential campaign. Vivek Ramaswamy, who should play a leading role in the second Trump administration, notably qualified BlackRock CEO Larry Fink “king of the woke industrial complex and the ESG movement” .

• The fight against environmental and social regulations (including DEI policies) should be strengthened at the federal level under Trump II by the new commissioner nominated to lead the Federal Trade Commission (FTC), Andrew Ferguson. FTC agenda released by Trump transition team includes ‘investigation and prosecution of DEI and ESG collusion’ .
• The House Judiciary Committee, led by the GOP, also published a report in June 2024 exposing “proof that a “climate cartel” made up of left-wing environmental activists and large financial institutions colluded to force American companies to “decarbonize” and reach “net zero”” .
• The report singled out the involvement of the Glasgow Financial Alliance for Net Zero, of which the NZBA is a part, as well as the Big Three: BlackRock, Vanguard and State Street.

These reversals also dominate the debate, as evidenced by the Wall Street Journal headline dated January 2: A New Year Resolution Worth Toasting : End Net Zero (“A new year’s resolution worth celebrating: The end of net zero”) . The newspaper states in particular that the year 2025 could mark “the year of the definitive death of net zero” because “the disastrous consequences of aggressive policies in terms of reducing emissions have a visible and negative effect” and that voters are starting to sanction them.

Net zero implies that greenhouse gas emissions are reduced as close to zero as possible. How quickly countries achieve this goal will determine the extent of global warming globally. To limit it to 1.5°C in accordance with the Paris Agreement, this goal of net zero emissions should be achieved by 2050.