On the west coast of the United States, specifically in Los Angeles, the 82nd edition of the Golden Globes took place on January 5, combining a night full of surprises and implicit messages about social and environmental responsibility. , which were reflected in the clothing and other choices at the gala. While, on the other side of the country, on WallStreet, another bank has decided to withdraw from the Net-Zero Banking Alliance (NZBA), a commitment to align financial activities in environmental matters.
What has happened? In the final weeks of 2024, several US banks left the Net-Zero Banking Alliance, including Goldman Sachs, Wells Fargo, Citi, Bank of America and Morgan Stanley. Recently, on Monday, January 7, JPMorgan joined them, being the latest lender to join the withdrawal of the largest climate coalition in the sector.
None of them have given a clear reason for the abandonment. In fact, JPMorgan stated in a statement: “We will continue to work independently to promote the interests of our company (…) we will continue to focus on pragmatic solutions to help promote low-carbon technologies while advancing energy security.” However, several media have indicated that this occurs after months of pressure from some Republican politicians. In fact, the main financial regulator of the Federal Reserve, Michael Barr, has expressed in a statement that he will resign next month, avoiding. a possible confrontation with the incoming Trump administration and Republicans in the Senate.
Republican scrutiny. Given Trump’s imminent arrival to power, the Financial Times has reported how banks have denounced how these Republican pressure groups have accused them of boycotting fossil fuel companies. Additionally, Republicans have intensified their criticism of environmental, social and governance (ESG) policies, arguing that these practices violate antitrust laws and deliberately limit access to fossil fuel supplies.
Financial institutions find themselves in a complex situation, where they must seek a balance between conservative criticism in the US with the demands of progressive investors and clients who demand green financing for the energy transition.
Will they continue to be funded? Despite leaving the NZBA, some financial institutions will continue to promote green financial products. An example is the case of Bank of America, which structured a $1 billion deal to refinance Ecuador’s debt, and Citi, which advised on blue bond issues for marine conservation. For their part, active managers such as BlackRock and Vanguard have offered both pro-ESG and anti-ESG options, so that investors can direct their preferences.
What will happen to your investments in the EU? Regulations in the EU are increasingly rigorous regarding climate risks in companies’ annual accounts. For this reason, some banks have argued that leaving the NZBA will allow them to focus on complying with European regulations, as is the case with Goldman Sachs.
Building bridges with nuclear. The abandonment of the NZBA by major US banks illustrates the tensions between political demands. However, in this context, nuclear energy can become the path to the energy transition due to the need for sources for the strong growing demand for electricity, such as that required by data centers. In fact, large global banks have their sights set on this energy to guarantee long-term energy security.
The decision of the large banks to abandon the Net-Zero Banking Alliance is part of a complex moment, where political and economic tensions are intertwined with a profound cultural change. Just like at the Golden Globes, where the most ethical and sustainable garments set the tone, the financial sector also knows that sustainability is not a passing trend, but a movement that is transforming the way industries operate. With Trump’s arrival to the presidency in the coming weeks, the direction of this situation is still up in the air.
Image | Unsplash and Unsplash
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