The Sudden Shift in Big Banks’ Stance on Fighting Climate Change

Near the end of 2024, the world’s hottest year on record, major U.S. banks and asset managers withdrew from initiatives under which they had committed to adhere to lending and business practices that would help achieve net zero greenhouse gas emissions by 2050.

They all did so in the weeks after Donald Trump won the 2024 election, with a platform that was part “drill, baby, drill,” and critics say the banks’ actions reflect shifting political winds and their fear of legal challenges as Republicans ascend to power.

Key Takeaways

• Most major U.S. banks and asset managers had joined coalitions that committed them to supporting efforts to eliminate carbon emissions by 2050.
• Banks joined the Net Zero Banking Alliance (NZBA) and asset managers joined the Net Zero Asset Managers (NZAM) coalition. Both are global alliances formed in partnership with the United Nations.
• Most major U.S. banks and asset managers withdrew from their respective coalitions following Donald Trump’s re-election in 2024, but some say they will continue to consider the impact on the climate when deciding whether to finance or invest in a project.
• After the U.S. asset managers’ withdrawal, the NZAM suspended activities.

Banks’ and Asset Managers’ Net Zero Pledges

In joining their respective coalitions, the banks and asset managers committed to aligning their business practices and investment decisions with supporting the goal of achieving net zero greenhouse gas emissions by 2050 or earlier.

For the asset managers, the initiative was also about mitigating financial risk and maximizing the long-term value of assets. Left unaddressed, climate change will wreak havoc on society and the economy, costing an estimated $38 trillion annually just 25 years from now. Estimates show that an increase in global temperatures of 3 degrees Celsius compared to preindustrial levels could reduce global GDP by 25%. (In 2024, the world had experienced 12 consecutive months of temperatures 1.5 degrees Celsius above preindustrial levels.)

Big Banks, Asset Managers Quit Climate Alliances

After Trump’s election win in November 2024, major U.S. banks and asset managers reversed course and began withdrawing from their climate alliances. They included JPMorgan, Citigroup, Bank of America, Goldman Sachs, Wells Fargo, and Morgan Stanley. Top Canadian banks followed suit in the ensuing weeks, and European banks began reconsidering their membership.

Asset manager BlackRock, the world’s biggest investor, announced that it was cutting ties with NZAM, saying its membership in the coalition caused “confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials.”

The Politics and Business of Climate Change

The results of the 2024 U.S. election—and politics more generally—prompted these banks to back away from climate-focused initiatives to fend off “anti-woke” attacks from right-wing politicians. Republicans have long viewed climate change as a non-priority—some even deny it’s real—and have advocated for increased use of fossil fuels, a major contributor to greenhouse gas emissions.

The banks and asset managers had faced months of growing pressure from Republican politicians. They also faced legal concerns. Led by Texas, a number of Republican-led states have sued BlackRock, State Street, and Vanguard, alleging that they used their investments in coal and other fossil fuel companies to constrict supplies of these fuels in an effort to reach net zero emissions goals.

Many likely decided that, with or without the political pressure, the opportunity cost of not investing in or lending to fossil fuel companies was no longer worth it.

The Bottom Line

Scientific consensus is that climate change poses an enormous threat the world—perhaps an existential threat to humanity with a likely catastrophic economic impact. Despite that, many major banks have stepped back from agreements and organizations focused on fighting climate change as the political winds have blown back in the favor of rightwing politicians.

As time passes and the impact of climate change becomes clearer, bankers and asset managers will get a better view of how climate change impacts their portfolios.