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Within just one month, from December to early January, six of America’s largest banks decided to withdraw from the Net Zero Banking Alliance (NZBA), a United Nations initiative designed to align the banking sector with the goals of the Paris Agreement. Their choice appears to stem from concerns over potential backlash from the incoming Trump administration, which is set to take office on the 20th of January with a majority in both the House and the Senate.

In early December, Citigroup, Bank of America, Wells Fargo, and Goldman Sachs withdrew from the Alliance, with Morgan Stanley and JP Morgan −the nation’s largest bank − following suit in January. As it stands, only three US banks remain members of the NZBA: Amalgamated Bank, Areti Bank, and Climate First Bank, which are smaller and less influential than their counterparts who left the alliance.

How the Net Zero Banking Alliance works

The Net Zero Banking Alliance, an international initiative launched in April 2021 under the leadership of the United Nations Environment Programme Finance Initiative (UNEP FI), seeks to unite banks worldwide in a commitment to aligning their lending, investment, and capital markets activities with the target of net zero greenhouse gas emissions by 2050. Following the recent exodus of US banks, the alliance now comprises 141 banks from 44 countries, representing total assets of 61 trillion dollars.

When joining the NZBA, banks and their chief executives pledge to align their lending and investment portfolios to achieve net zero by 2050. Within 18 months of signing, they are required to set targets for 2030 and 2050, along with intermediary goals at five-year intervals. They must also publish annual updates on emissions and progress towards their transition strategies, including sector-specific targets and climate policies.

A bank’s initial targets, for instance, should prioritise sectors with the highest emissions intensity in its portfolio − meaning areas where the bank can have the most significant impact. Additionally, the use of carbon credits to achieve net zero should be restricted to offsetting residual emissions through CO2eq removal, in the case that limited technological or financial alternatives exist for their elimination.

The role of Donald Trump

While none of the banks have offered an official explanation for their decision to leave the climate alliance, many analysts link their departure to the soon-to-be-sworn-in Donald J. Trump, who will be the 47th President of the United States of America.

According to Paddy McCully, Senior Analyst at Reclaim Finance, a non-governmental research and campaigning organisation on climate finance, “The sudden exodus of these big US banks is a lily-livered effort to avoid criticism from Trump and his climate denialist cronies.” The banks' departure does not necessarily indicate a revision of their climate commitments. In fact, a spokesperson for Morgan Stanley told ESG Today that, despite withdrawing from the coalition, the bank’s commitment to achieving net zero remains unchanged.

The crusade against ESG is not new in the United States. As early as autumn 2022, some American banks had threatened to withdraw from both the NZBA and the Glasgow Financial Alliance for Net Zero − an initiative launched at COP26 in Glasgow to accelerate the shift towards a zero-emission global economy. At that time, fourteen Republican state attorneys general launched an investigation into the climate commitments of NZBA signatory banks, accusing them of limiting access to finance for oil companies due to their environmental, social, and governance (ESG) practices.

Moreover, the Net Zero Banking Alliance is not the only target of the American right. In November 2024, BlackRock, Vanguard, and State Street − among the largest US investment firms − were sued by eleven states governed by Republicans, including Texas, Iowa, Alabama, and Nebraska. The lawsuit alleged violations of antitrust laws, claiming that the companies' support for climate initiatives had resulted in reduced coal production and higher energy prices for consumers.

On the 9th of January 2025, BlackRock, which manages approximately 11.5 trillion dollars in assets, announced its withdrawal from the Net Zero Asset Managers Initiative. This initiative, formal partner of the UNFCCC's Race to Zero coalition, brings together asset managers committed to supporting the goal of achieving net zero greenhouse gas emissions by 2050 by promoting investments aligned with this target.

The role of Europe

According to McCully, the decision by American banks to withdraw from the Alliance could, perhaps, be an opportunity to raise the standard of climate commitments. “European and other banks must not use the exit of the US banks as an excuse to weaken their own climate commitments,” he explains. “On the contrary, they have a unique opportunity to encourage the NZBA to strengthen its recommendations, by adopting meaningful positions against the expansion of fossil fuel.”

At present, most of the banks in the coalition are from Europe. “By strengthening their commitments, NZBA banks can demonstrate that they have not simply used US obstructionism as an excuse to maintain the NZBA’s weak position,” states McCully. “Other major fossil fuel financiers, such as the Canadians and the Japanese, must also not replace the US as obstacles to stronger action within the NZBA.”

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