Exodus by Wall Street banks from climate group worries advocates

US lenders have been rushing in recent weeks to leave one of the world's top banking sector climate coalitions, drawing scorn from campaigners who worry the industry is losing resolve to take action on fossil fuels.

Goldman Sachs broke ranks to announce on Dec. 6 it was leaving the Net-Zero Banking Alliance (NZBA) and was soon followed by Wells Fargo, Citi, Bank of America and Morgan Stanley. The exit of some of the world's biggest lenders means the NZBA, whose members aim to align their financing with the global climate fight, now includes just JPMorgan among the Big Six US banks.

The exodus ended unhappy marriages for most after Republican politicians warned that membership in the group, particularly if it led to reduced financing for fossil fuel companies, could breach antitrust rules.

Banks that have pulled out may now reduce their commitments to climate-friendly policies, said Patrick McCully, senior analyst for energy transition at Reclaim Finance.

"The key thing to watch will be weakening of their existing targets and policies," said McCully, noting some banks had ambitious targets for decreasing emissions. Still, he did not expect banks to announce publicly any such changes.

While the NZBA had sought at various times to tailor its rules to keep the large and systemically important banks onboard, most recently last year, the efforts were ultimately not enough.

Jeanne Martin, head of banking programme at advocacy group ShareAction, said those leaving were sending a signal to the market that climate change has become even less of a priority for them.

"This is concerning when they are among the world's largest providers of financing to fossil fuels," she said.

A spokesperson for JPMorgan, the last remaining major US bank in the alliance, said it regularly evaluates its memberships of such groups, without commenting on whether it plans to join the exodus. The other US members are smaller: Amalgamated Bank, Areti Bank and Climate First Bank.

While none cited it as a factor, hanging over the exits was a two-year-long US backlash against environment, social and governance investing. A group of Republican politicians, many of them state attorneys general, have accused members of potential breaches of antitrust rules.

Such pressure stepped up after a Republican clean sweep in November's US elections heralded the return of Donald Trump as president, with investors including BlackRock recently facing legal challenges over their climate efforts.

For their part, the banks largely avoided giving a direct reason for needing to leave the NZBA, instead saying they remained committed to helping clients transition to a low-carbon economy and disclosing their actions.

Analysis of December syndication fee income from loan and bond issuance by financial think tank the Anthropocene Fixed Income Institute showed each of the US leavers earned more from fossil fuel than green energy.

"As a first cut, some of these banks ... can pretty easily say 'nothing has changed' as they are still in a make-more-money-from-fossil-fuel mode," said AFII Chief Executive Ulf Erlandsson.

A study entitled 'Banking on Climate Chaos from 2024 suggested the six biggest US banks were all among the top-20 global lenders to fossil fuel companies.

Despite the exits, the largest US banks had all made "strong climate commitments" through the NZBA and investors would continue to push for more information about their efforts, said Mindy Lubber, chief executive of non-profit Ceres.

"Ceres will continue supporting banks as they set and achieve targets and implement transition plans. Banks are key to supporting the global goal of net zero emissions and to the economic opportunities that are arising from the transition."

Following the mass exit by US lenders, the NZBA still has 142 members from 44 countries with $64 trillion in assets, with 80 European banks accounting for the largest share of the dollar figure. Banks remaining in the coalition include HSBC, Barclays and BNP Paribas.

A spokesperson for the NZBA was not immediately available for comment.

Given previous tussles over where to set the bar for NZBA membership, the exit of the US banks offered an opportunity for those who want to be more ambitious, McCully said.

"European banks have complained that they'd love the NZBA guidelines to be stronger but the US members just won't let it happen - so (it is) now time for the Europeans to step up and show that they weren't just using US obstructionism as an excuse for foot-dragging," he said on LinkedIn.