Update Jan. 18, 2025: Four of Canada’s biggest banks have quit the Net-Zero Banking Alliance. “Banks including BMO, National Bank, TD Bank Group, and CIBC confirmed Friday they were no longer members,” CBC reports. “The withdrawals from the alliance follow departures by the six largest banks in the U.S. in recent weeks, ahead of the presidential inauguration of Donald Trump.”

Update Jan. 14, 2025: The Net-Zero Asset Managers (NZAM) initiative is suspending operations and reviewing its next steps after the world’s biggest investor, New York City-based BlackRock, announced it was pulling its US$11.5 trillion in assets out of the alliance, Reuters reported in a Jan. 13 exclusive.

“The step followed months of escalating pressure from some Republican politicians over its stance on investing in fossil fuel companies, with concern that such pressure could rise further as President-elect Donald Trump prepares to take office,” the news agency writes. “The group counted more than 325 signatories managing more than $57.5 trillion in assets as members, according to its website as of last week, before the departure of BlackRock.”

Responsible Investor has details on NZAM members’ mixed reaction to the announcement—some positive, others not so much.

The Royal Bank of Canada and the Bank of Montreal are signalling that they’re reconsidering their membership in the Net Zero Banking Alliance (NZBA), part of a global network that UN Climate Finance Envoy Mark Carney brought together to mobilize US$130 trillion in global economic clout over 30 years to finance the low-carbon transition.

RBC and BMO would be joining an “exodus” of U.S. banks that have left the alliance in recent weeks, Bloomberg reports, “with Goldman Sachs Group Inc., Morgan Stanley, Wells Fargo & Co., Bank of America Corp., Citigroup Inc., and JPMorgan Chase & Co. all leaving. The moves coincide with intensifying Republican attacks on what U.S. conservatives call ‘woke’ capitalism and criticisms that such voluntary alliances haven’t had a meaningful impact on reducing greenhouse gas emissions.”

“All the U.S. banks are running scared of Trump 2.0,” Reclaim Finance senior analyst Paddy McCully told CBC. “Their fear over being attacked by Trump is much greater than their climate commitment, so they all ditched the NZBA.”

The U.S. banks are taking multiple hits on social media for abandoning their climate targets while Los Angeles burns. “This brazen climate indifference arrives in the narrow window between Donald Trump’s election and inauguration, signaling a grim alignment of financial power with fossil fuel interests,” the We Don’t Have Time coalition wrote, in a weekly newsletter that featured a photo of a Bank of America branch in flames.

Canada’s largest and third-largest banks may not be far behind, Bloomberg says.

“Pulling out of NZBA, hypothetically, doesn’t lead to a non-commitment to net zero or climate change,” RBC CEO Dave McKay told a conference in Toronto last week. “It just means that mechanism, that organization that fostered oversight and policies and rules around what you can and can’t do and how you report, maybe that isn’t the right mechanism to do it.”

BMO CEO Darryl White said his institution is still a “member of the alliance. At least we are today.” While the bank is onboard with a low-carbon economy, he added, it has “a commitment, particularly here in Canada, to our legacy energy customers completely. We won’t abandon that.”

“We told you so,” Stand.earth Climate Finance Director Richard Brooks said in a statement. “RBC and the other Canadian banks entered into the Net Zero Banking Alliance to greenwash their fossil fuel financing and to gain cover under increasing pressure from customers and investors. It appears they misled investors about their intentions with the alliance. While the world is on fire, quitting even mediocre climate initiatives is an out of touch move that shareholders, workers, and regulators should pay close attention to.”

Decline of a Financial Alliance

Carney, who’s expected to launch his bid for the federal Liberal Party leadership later this week, had unveiled the Glasgow Financial Alliance for Net-Zero (GFANZ) with great fanfare during the COP26 climate summit in Scotland in 2021. “Right here, right now, is where finance draws the line,” he declared at the time.

In the wake of the Bloomberg report, Diane-Laure Arjaliès, associate professor of sustainability and managerial accounting at the Ivey business School, told CBC that supporting the climate transition turned out to be more complicated than the world’s financial institutions had bargained for.

“Progress has been tinted,” she said, “because there were new forms of climate exposure… new carbon emissions that were not really anticipated. So for them, right now, it’s extremely difficult to commit to net zero.”

Adam Scott, executive director of Shift: Action for Pension Wealth and Planetary Health, said there was never any front-line support for the initiative. “It’s not a real political movement of citizens,” he told CBC. “It’s a cynical attempt by the fossil fuel industry, in collusion with state governments, to try to slow down this inevitable transition that’s happening.”

But the seeds of GFANZ’ decline were sown before the highly-touted initiative was even officially launched. In the months leading up to the Glasgow COP, Carney was only able to bring together such wide-ranging investment firepower by assuring participating institutions they could set their own pathways to achieving net-zero, with or without a commitment to end fossil fuel investment, then counting on sustained public attention to keep them on track, The Energy Mix revealed during the first week of the COP.

The rules guiding GFANZ’ formation made no explicit mention of a fossil investment phaseout “because the rules are outcome-specific rather than process-specific,” a spokesperson told The Mix at the time. “The overall commitment is to reduce your emissions in line with a 1.5°C trajectory, and it’s up to individual banks to do that.” But “there’s not a rule about fossil fuel financing because it’s up to individual banks how to get to that trajectory.”

A scant three months later, Bloomberg was reporting that a “Great Climate Backslide” had begun, with banks pouring more than a trillion dollars into oil, gas, and coal while scrambling to burnish their green credentials. That total included $2.5 billion in bond deals that JPMorgan Chase & Co. had underwritten for Russian gas giant Gazprom and Oklahoma-based Continental Resources Inc., while Wells Fargo was on track to double its fossil fuel lending compared to 2020.

By November 2022, GFANZ was said to be “quiet quitting” its net-zero commitments, after several major institutions threatened to leave the alliance if tougher requirements for real climate action increased the risk of legal exposure.

In “tense meetings in recent months,” American GFANZ members like JPMorgan, Morgan Stanley, and Bank of America along with Europe’s Santander Bank “have said they feel blindsided by tougher UN climate criteria and are worried about the legal risks of participation,” the Financial Times wrote at the time. “The potential loss of some of the world’s biggest and most influential banks would be a serious blow for Carney’s GFANZ group.”

‘Science and Financial Reality Deniers’

The angst was triggered by a new set of standards released earlier that year by the UN’s Race to Zero initiative, with a June 2023 deadline for participating institutions to comply—even though the banks were given the ample warning that more specific, ambitious targets were a part of the plan. At the time, news reports indicated that Canada’s five biggest banks might be kicked out of GFANZ as a result.

And bankers aren’t the only ones abandoning ship. “Last year, a (GFANZ) sub-group for insurers was hit by a mass exodus amid litigation threats,” Bloomberg writes. “And in 2022, an equivalent group for asset managers parted ways with Vanguard Group Inc., the world’s second-largest money manager.”

Last week, New York City Comptroller Brad Lander (now a candidate for New York mayor) scorched two major institutional investors for abandoning NZAB and another component of the GFANZ network, the Net Zero Asset Managers initiative.

“BlackRock and JPMorgan are fiddling while Los Angeles burns,” Lander said in a statement. “Their shortsighted, weak-kneed decisions to exit the Net Zero Asset Managers initiative and Net Zero Banking Alliance deny the reality—which their leaders know well, and which is tragically right before our eyes—that climate risk is financial risk.”

The Los Angeles wildfires “are just the latest overwhelming evidence that climate change is wreaking havoc on our planet, our portfolios, and the economy,” he added. “By [abdicating] their responsibilities to combat climate change, these financial institutions are yielding to the authoritarian tone set by the incoming Trump administration. They are, in essence, becoming science and financial reality deniers.”