As Donald J. Trump’s second presidency begins, America’s biggest banks and asset managers have abandoned one of the most overt symbols of their commitment to achieving green goals: climate action networks.
In the month before Mr Trump’s inauguration on Monday, the six biggest US banks, including JPMorgan and Goldman Sachs, left the Net Zero Banking Alliance, while BlackRock, the world’s largest asset manager, left a similar initiative . And on Friday, the Federal Reserve pulled back from a network of regulators studying the risk of climate change.
The exodus comes after years of mounting political and legal pressure to ditch environmental, social and governance goals. Climate groups, which have encouraged targets to reduce carbon emissions and finance the transition to a green economy, had drawn the ire of some Republican lawmakers.
Mr Trump has also targeted the government’s efforts to pursue climate change policies.
“The political environment has changed fundamentally,” said Shivaram Rajgopal, a professor at Columbia Business School. “If you’re the CEO of one of these big banks, if you stay in one of these alliances, you’re just opening yourself up to litigation. It’s like having a bull’s eye on your back.”
The departures follow a pattern of steps taken by business leaders to avoid clashing with the Trump administration. This month, social media giant Meta ended its fact-checking program and added a Mr. Trump ally to its board.
Less than four years ago, banks, asset managers and insurers sought to show their green credentials, joining global initiatives seeking to accelerate climate action. At COP26, the United Nations climate summit in 2021, the Glasgow Net Zero Finance Alliance was launched to bring together firms that collectively controlled $130 trillion in assets. It became an umbrella group for net zero alliances with requirements that were not too strict to allow as many members as possible.
For some firms, especially in Europe, the rules were too loose, which created tensions within the groups. At the same time, the backlash in the United States against initiatives that took into account a company’s environmental and social practices grew more intense. In November, BlackRock and two other major asset managers were sued by Texas and 10 other Republican-led states for “anti-competitive practices” and accused of conspiring to use net-zero pools to limit coal production and increase electricity prices.
Before their departure, some financial leaders had already softened their language on climate goals, shifting the focus to energy security, which implicitly meant relying on fossil fuels for longer. But the departure from these groups has been the biggest concession to calls to end so-called smart capitalism, or policies that hurt the oil and gas industry. Last year, the Net Zero Alliance for Insurers disbanded after losing about half its members, and Climate Action 100+, an investor group, has seen prominent member departures.
The Net Zero Banking Alliance lost the largest US banks, but it still has more than 130 members, most of them European banks. On Friday, Canada’s four largest banks also left the alliance.
BlackRock left the Net Zero Asset Managers initiative this month because membership had “caused confusion” and led to “legal inquiries” from public officials, BlackRock executives said in a letter to clients seen by The New York Times. The asset manager said leaving the group would not change the way it managed portfolios or developed investment products, including for clients that had sustainable, zero-carbon targets.
JPMorgan, Bank of America, Citigroup and Goldman Sachs said in statements that they will continue to support clients towards their sustainability goals. The chief executives of Bank of America and Citigroup are also still part of the Glasgow alliance, the umbrella group, which changed its rules so that firms could remain involved without being members of the target-setting groups.
“This change reflects the progress made to date, the spread of climate regulation and the need to mobilize more capital for developing countries,” a spokesperson for the Glasgow alliance said in a statement.
Whether or not banks are in these alliances is unlikely to make a significant difference in their pursuit of climate action, said Professor Rajgopal, which some research has backed up.
“It was a party, it was a festival,” he said, but the behavior of banks and other business leaders never changed.
The departures widen the gap with Europe, where companies are being pushed to adopt stricter climate targets and increase disclosure of climate risks. Big US banks and money managers still have to meet the demands in Europe, where they have significant client bases. BlackRock said its biggest clients in Europe all had net zero targets.
“It is extremely disappointing to see these departures,” said James Alexander, chief executive of the UK Sustainable Investment and Finance Association, particularly in light of the Los Angeles fires and as a dangerous global warming threshold was breached.
“Our hope is that they will continue to undertake this work at the pace and scale that science demands,” he said.
