Major American banks are fleeing an international agreement to align their lending and investments with the goal of reaching net zero carbon emissions by 2050, in what some analysts see as a political shift away from initiatives explicitly linked to combating climate change.
Citigroup, Bank of America, Morgan Stanley and Wells Fargo are among those that have pulled out of the U.N.-convened Net-Zero Banking Alliance, which launched with great fanfare in 2021. The moves come as Donald Trump, who ran against climate initiatives, is set to return to the White House and as Republicans will soon have control of both chambers of Congress.
Several of the banks provided brief statements that largely reiterated their commitment to reducing carbon emissions without giving clear reasons for leaving the alliance.
Whether their departure has any material impact on the transition away from planet-warming fossil fuels remains to be seen, several experts and industry leaders told The Atlanta Journal-Constitution. International agreements are largely symbolic, and some banks may simply be trying to avoid conflict with the incoming Trump administration and Republican state attorneys general who have filed lawsuits against firms that use what are known as environmental, social and governance metrics, or ESG, to guide investments, they said.
The alliance has counted more than 140 member banks that represent more than $61 trillion in assets.
Georgia has seen a huge influx in electric vehicle, battery and solar manufacturing jobs in the past several years, with manufacturers lured by local, state and federal incentives. A $7.6 billion Hyundai Motor Group EV plant near Savannah on the coast is the largest such investment in the state’s history. Hundreds of miles away, the mountains of North Georgia are now home to the largest solar panel manufacturer in the Western Hemisphere, Qcells.
Despite the political hostility among Trump and many other conservative U.S. lawmakers toward any policies that acknowledge climate change, lending and investment decision-makers will still have to contend with market shifts, binding regulation in some major global markets, and corporate and consumer demand around climate goals.
Sudheer Chava, a professor of finance at Georgia Tech’s Scheller College of Business, said staying in the Net-Zero Banking Alliance would have likely required banks to reduce lending to a significant portion of the economy, apply pressure on borrowers to reduce their greenhouse gas emissions and purchase renewable energy credits or other environmental attributes to compensate for emissions elsewhere in their portfolios.
But just as joining the coalition didn’t immediately stop the banks from lending to oil and gas companies, leaving it doesn’t mean they are abandoning their investments in the clean energy transition, especially when those investments make economic sense, he said.
“Nowadays, many of the banks have their own internal frameworks for climate change,” he said, adding: “Definitely, they’re going to rebrand.”
Trump has pledged to once again pull the United States out of the Paris Agreement, and has also expressed animosity toward climate spending and regulation that has helped spur billions of dollars of investment in renewable energy, electrification, batteries and other sustainable technology. Trump has also promised to encourage more fossil fuel extraction, though the U.S. is already the top global producer of crude oil and natural gas.
Wesley Longhofer, an associate professor of organization and management at Emory University’s Goizueta Business School, said backing out of the coalition might take some political pressure off banks in the short run, but is unlikely to change the long-term market trajectory.
“This does certainly slow down momentum,” Longhofer said. “Whether or not it completely halts the progress that we’ve made, I don’t think that it will. I think there’s been a lot of exciting development in clean technology and clean energy over the last couple of years that I don’t think is going away.”
Representatives of several companies working in the climate and energy space with a presence in Georgia said they were not worried about funding drying up so long as businesses are growing and can demonstrate market demand for their products or services.
“With or without net zero goals, we expect increasing demand for domestically or locally produced lithium-ion battery materials in the coming decades,” said Thomas Frey of Massachusetts-based Ascend Elements, which has an electric vehicle battery recycling facility in Covington, east of Atlanta. He said by email that battery recycling — or “urban mining,” as he called it — is the most efficient way to source highly concentrated reserves of critical battery metals like lithium, nickel and cobalt.
“It’s not just about being a ‘green technology;’ it’s about being the most efficient and economical technology,” Frey said.
Rafael Dobrzynski, CEO of Dimension Energy, a national solar energy and battery storage company with headquarters in Atlanta, said his company closed out 2024 with multiple major financing deals from big banks.
“(W)e expect reputable financial institutions to continue to invest in this technology regardless of membership in thematic alliances,” he said in a statement to the AJC.
The banks that have left offered few, if any, details on their decisions to pull out of the alliance.
“(W)e remain committed to reaching net zero and continue to be transparent about our progress,” Citigroup said in a statement. “We will continue to work with our clients on their transitions to a low-carbon economy while helping ensure energy security, given the range of transition pathways that are being pursued across our global network.”
Bank of America pointed to its long-standing support for the goals of the Paris Agreement and said it plans to deploy $1 trillion by 2030 to accelerate the transition to a low-carbon, sustainable economy, as part of a broader $1.5 trillion sustainable finance goal.
“Morgan Stanley’s commitment to net-zero remains unchanged,” the bank said. “We aim to contribute to real-economy decarbonization by providing our clients with the advice and capital required to transform business models and reduce carbon intensity.”
Wells Fargo said it has ended its membership in the alliance, but did not provide additional comment.
Note of disclosure
This coverage is supported by a partnership with Green South Foundation and Journalism Funding Partners. You can learn more and support our climate reporting by donating at ajc.com/donate/climate.
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