Why Wall Street Banks Are Suddenly Quitting A Global Climate Group

From Goldman Sachs (GS) to Morgan Stanley, many of the largest banks in the U.S. are quitting an international climate group amid rising political pressure as the nation enters a second Trump presidency. 

First launched in April 2021, the United Nations’ Net-Zero Banking Alliance (NZBA) aims to make the financial sector more environmentally sustainable by converges banks, insurers and investors to set sustainability targets in line with the group’s standards. The NZBA has more than 140 bank members across 44 countries that manage $64 trillion in total assets. But in recent weeks, U.S. banks have been pulling out of the group en masse. 

Goldman Sachs

Goldman Sachs was the first major Wall Street bank to pull out of the NZBA, announcing its departure on Dec. 6 without giving a reason. The move came just days after Texas Attorney General Ken Paxton sued BlackRock (BLK), Vanguard and State Street—three of the largest asset managers in the world—for conspiring to manipulate energy markets. Paxton accused these institutional investors for pressuring coal companies in which they own large stakes into reducing production and deceiving investors into pursuing ESG (environmental, social and governance) strategies. 

On its website, Goldman Sachs still keeps its commitment to achieve net-zero carbon emission by 2030 across its operations and supply chain. The bank said it’s still “very focused on the increasingly elevated sustainability standards and reporting requirements imposed by regulators around the world.”

Wells Fargo

Wells Fargo (WFC) announced its departure from the group on Dec. 20. Again, the bank did not provide a reason but maintains a sustainability page on its website, which includes a goal to reduce energy usage from 2019 levels by half before 2030.

Four days before Wells Fargo’s withdrawal, a number of climate advocacy groups co-published a letter to the NZBA addressing “slipping standards” within the group. “The alliance must not seek to appease or accommodate potential defectors or remain complacent when its members dilute their targets, as doing so undermines the very purpose of the coalition and jeopardizes global climate goals,” the letter said. For instance, Morgan Stanley loosened its target to align with the Paris Agreement’s maximum warming goal of 1.5 degrees Celsius to 1.7 degrees Celsius—“a lower ambition scenario requiring less emissions reductions by the bank,” the letter said.

Citigroup and Bank of America

Citigroup (C) and Bank of America (BAC) both quit the NZBA on the last day of 2024. Citi said it’s working towards its own goals outside of the group while Bank of America said it will continue working with clients on environmental issues and meeting their needs. 

Like their peers, Citi’s net-zero goals and Bank of America’s environmental sustainability commitments remain published on their respective websites. Both banks seek to achieve net-zero carbon emission across its financing activities, operations and supply chain by 2050.

Morgan Stanley

Morgan Stanley quit the NZBA on Jan. 2. The bank also gave no reason for its defection but maintains its internal climate goals. The bank says it reached carbon neutrality in 2022, but is still working on reaching net-zero financed emissions, with interim goals set for 2030.

What does the exodus mean?

Some ESG experts see the exodus as more of an attempt to align with political pressure than a retreat from climate commitments. “Financing sustainable initiatives is increasingly linked to long-term profitability and market demand,” Sunil Kansal, head of consulting and valuation services at the ESG consulting firm Shasat, told Observer. “What matters is not the framework but the outcome. Banks will continue to drive the green transition, adapting their strategies to evolving circumstances.”

“These exits are not a rejection of climate action. They reflect a reaction to multiple factors,” Chris Pyke, chief innovation officer at the Global Real Estate Sustainability Benchmark (GRESB), told Observer. He alluded to factors like reporting burdens, challenging targets and—perhaps most relevant for U.S. banks—antitrust scrutiny from Republican lawmakers. As the nation heads into a second Trump presidency, efforts to firm up environmental reporting regulations are likely to fall flat given his anti-regulation stance.