Banks leave climate alliance. Net Zero Banking Alliance comes to an end

The global banking alliance has completely fallen apart after its biggest players left. This came after members voted to dissolve it, despite the alliance having made concessions on its original goals.

The alliance, which Mark Carney (Canada’s current prime minister) helped establish, announced on Friday that it was immediately and completely ceasing its activities. The move came after the world’s biggest banks left.

Major US banks had already left before Donald Trump’s inauguration. Goldman Sachs was the first, prompting other Wall Street players to follow suit.
This year, major European banks such as HSBC and Barclays followed. The alliance was unable to retain them even after lowering its “net zero” requirements. In August, a “general meeting” was convened, at which members voted to end its activities.

The alliance issued guidance documents for its members. Its latest document was published alongside the announcement that it was ceasing operations. The documents were intended to advise banks on how to prepare to meet the requirements of the Paris Agreement. Some banks say they plan to continue using the material.

Reasons for the changes

There are several reasons. Former alliance members likely had two main concerns. First, they feared lawsuits from Republican-led US states. Similar cases have affected asset managers such as BlackRock and Vanguard. State administrations accused them of using ESG criteria and other climate activism to engage in a form of cartel-like behaviour.

At the same time, there have been quite a few lawsuits against banks for doing too little on climate. Some argue that if there is an economic rationale for investing in climate projects, it should not be a problem. Banks likely assumed that the federal administration’s influence—and whether or not it would support such initiatives—would be decisive. So, after Donald Trump was elected, they decided to leave.

Banks also likely saw an opportunity to support fossil fuel projects that the new US administration wants to launch and support. This is relevant even for non-US banks, since most large banks have some exposure to the US market.