A United Nations-backed coalition of major banks committed to aligning their investments with fighting climate change is falling apart just weeks before President-elect Donald Trump is sworn into office.
In recent weeks, Morgan Stanley, Wells Fargo, Citi, Bank of America and Goldman Sachs all pulled out of the Net-Zero Banking Alliance (NZBA), an organization of lenders that aims to “[align] their lending, investment, and capital markets activities with net-zero greenhouse gas emissions by 2050.” While the specific reasons for the withdrawals have not been disclosed, the incoming Trump administration’s likely opposition to certain forms of so-called environmental, social and corporate governance (ESG) investing could be a factor, according to Will Hild, executive director of an anti-ESG organization called Consumers’ Research.
“I think it’s a combination of two factors: One, there’s a changing of the guard at the White House and the administration, and there’s a lot of what NZBA was doing that was illegal, and they’re worried about that,” Hild told the Daily Caller News Foundation. “And secondly, red states are starting to push back against these groups in court. The banks are saying, ‘We don’t need this. We could maybe get in trouble at the federal and state levels if we don’t get ourselves out of this pretty quickly.’”
ESG is a bad word
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Hild pointed to a lawsuit filed against three major asset managers by Republican Texas Attorney General Ken Paxton in November 2024 alleging a collusive and anticompetitive effort to artificially choke the coal market as evidence that red states are inclined to fight back against top-down imposition of ESG.
Morgan Stanley pulled out of NZBA on Thursday, following the withdrawals of Bank of America and Citi on Tuesday, according to Reuters. Goldman Sachs and Wells Fargo left NZBA earlier in December 2024, according to Financial Times
Supporters of ESG investing defend it as a means of making capitalism more environmentally-friendly, but critics of entities like NZBA assert that major lenders and asset managers are collusively violating their fiduciary duty to customers by prioritizing investments on the basis of other aims than maximizing returns.
Steve Nickelsburg, a partner at Clifford Chance, wrote in December 2024 that the Trump administration is expected to roll back federal rules and regulations designed to boost ESG.
“As a founding member of the Glasgow Financial Alliance for Net Zero (GFANZ) and a member of its Principals Group, Citi supports its decision to focus on addressing barriers to mobilizing capital to emerging markets in support of the low-carbon transition,” Citi said in a statement. “In light of this shift, and Citi’s progress towards its own net zero goals, we have decided to leave the Net Zero Banking Alliance and focus our attention on supporting GFANZ during this new phase.”
Bank of America confirmed to the DCNF that it withdrew from the NZBA and said that it “will continue to work with clients on this issue and meet their needs,” but it did not provide specific reasons for its withdrawal. Wells Fargo also confirmed that it left the NZBA, but declined to comment any further.
“We have the capabilities to achieve our goals and to support the sustainability objectives of our clients. Goldman Sachs is also very focused on the increasingly elevated sustainability standards and reporting requirements imposed by regulators around the world,” a Goldman Sachs spokesperson told the DCNF. “We have made significant progress in recent years on the firm’s net zero goals and we look forward to making further progress, including by expanding to additional sectors in the coming months. Our priorities remain to help our clients achieve their sustainability goals and to measure and report on our progress.”
Morgan Stanley did not respond immediately to a request for comment.
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