Big banks flee climate coalition formed to reduce carbon emissions

Morgan Stanley, Citigroup and Bank of America this week withdrew from an ambitious pandemic-era climate coalition designed to help drive a shift to reduce carbon emissions by businesses. That followed withdrawals over the past month by Wells Fargo and Goldman Sachs from the United Nations-backed coalition, known as the Net-Zero Banking Alliance.

JPMorgan Chase, the largest bank in the nation by assets and the only major U.S. bank left in the coalition, is also considering withdrawing from it, a person familiar with the matter said. A JPMorgan spokeswoman said “the bank regularly evaluates memberships" to ensure they further its “client and business interests."

Members of the coalition, launched in 2021, vowed to align “lending, investment and capital markets activities with net-zero greenhouse gas emissions by 2050."

The recent exodus from the coalition reflects a broad pullback by companies ahead of the second Trump administration from environmental, social and corporate-governance initiatives. They became a craze on Wall Street years ago but have since been maligned by conservative groups. President-elect Donald Trump has called climate change a “hoax" and is expected to roll back related regulations.

Right-leaning advocacy groups and activists like Robby Starbuck have been pressuring companies to abandon so-called ESG efforts. The lobbying campaigns and legal challenges are only expected to pick up with the incoming administration cheering on the efforts.

Morgan Stanley said it remains committed to net-zero goals and aims to achieve them by “providing our clients with the advice and capital required to transform business models." Goldman said it made “significant progress" on the firm’s net-zero goals and will continue to do so.

Citi, a founding member of a broader climate-focused group affiliated with NZBA, Glasgow Financial Alliance for Net Zero, said it plans to focus on that organization instead.

Banks have faced harsh condemnation over ties to the coalition from Republicans who have argued it amounted to a boycott of the oil and gas industries and that it could violate antitrust laws.

Aniket Shah, global head of sustainability and transition strategy at Jefferies, said banks should have taken a more critical look at potential legal implications and feasibility before they signed up for the coalition.

“During this period of euphoria and excitement and ebullience around climate, banks forgot to do their legal homework," Shah said.

John D. Sterman, an MIT Sloan School of Management professor who has briefed financial institutions on climate-change strategy, called the withdrawal of megabanks from the coalition a “short-term, myopic response" to political changes in the U.S. and other countries, a backlash against ESG and “climate denial."

After Wells Fargo withdrew from the NZBA last month, Texas Attorney General Ken Paxton applauded the bank and pressed other institutions to rescind ESG commitments he called unlawful.

NZBA is affiliated with GFANZ, a broader U.N.-endorsed climate coalition formed in 2021 that also covers asset managers and other industries. The broader group is co-chaired by Mark Carney, the former head of central banks in Canada and the U.K., and billionaire and former New York City Mayor Michael Bloomberg.

Some big U.S. banks were hesitant to join GFANZ, signing up only after cajoling from Carney, and early on there were signs of tensions.

JPMorgan and others threatened to exit after the U.N. published language recommending they restrict funding for fossil-fuel companies and end financing for new coal projects, The Wall Street Journal reported. That was averted when the head of the group reminded them that the U.N. groups can’t unilaterally set criteria for the lenders.

Write to Gina Heeb at gina.heeb@wsj.com