The 82nd Golden Globes combined a night of surprises and implicit messages about social and environmental responsibility, reflected in the gala’s clothing and other choices. Meanwhile, on Wall Street, another bank withdrew from the Net-Zero Banking Alliance (NZBA), a commitment to align financial activities with environmental issues.
What happened? In the last few weeks of 2024, several U.S. banks, including Goldman Sachs, Wells Fargo, Citi, Bank of America, and Morgan Stanley, left the NZBA. Most recently, on Monday, JPMorgan became the latest lender to withdraw from the industry’s largest climate coalition.
None of them has given a clear reason for leaving. According to Bloomberg, JPMorgan will “continue to work independently to advance the interests of our firm, our shareholders and our clients and remain focused on pragmatic solutions to help further low-carbon technologies while advancing energy security.”
However, several media outlets have pointed out that this comes after months of pressure from some Republican politicians. Indeed, the Federal Reserve’s top financial regulator, Michael Barr, has said in a statement that he’ll resign next month to avoid a potential confrontation with President-elect Donald Trump's incoming administration and Republicans in the Senate.
Republican scrutiny. With Trump’s imminent return, the Financial Times reports that banks have denounced Republican lobbyists’ accusations of boycotting fossil fuel companies. In addition, Republicans have stepped up their criticism of environmental, social, and governance policies, arguing that these practices violate antitrust laws and deliberately limit access to fossil fuel supplies.
Financial institutions find themselves in a complex situation, balancing conservative critics in the U.S. with the demands of progressive investors and clients for green financing for the energy transition.
Will these institutions continue to fund? Despite leaving the NZBA, some financial institutions will continue to promote green financial products. Examples include Bank of America, which structured a $1 billion deal to refinance Ecuador’s debt, and Citi, which advised issuing blue bonds for ocean conservation. For their part, active managers such as BlackRock and Vanguard have offered pro-ESG and anti-ESG options, allowing investors to target their preferences.
In the EU, for example, regulations are becoming stricter regarding climate risks in corporate financial statements. For this reason, some banks have argued that leaving the NZBA will allow them to focus on European compliance, as with Goldman Sachs.
Bridging the gap with nuclear power. Central U.S. banks’ abandonment of the NZBA illustrates the tension between political demands. However, in this context, nuclear power may be the way forward for the energy transition, given the need for sources to meet the rapidly growing demand for electricity, such as that required by data centers. Major global banks are looking to nuclear power to ensure long-term energy security.
Major banks’ decision to abandon NZBA comes at a complex time when political and economic tensions are intertwined with a profound cultural shift. Just like the Golden Globes, where more ethical and sustainable clothing is setting the tone, the financial sector knows that sustainability isn’t a passing trend but a movement that is changing the way industries operate. With Trump taking office in the coming weeks, the direction of this movement is still up in the air.
Image | Aditya Vyas (Unsplash)
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