 The recent mass exodus of banks from climate groups may be less of a setback than it seems. JPMorgan on Tuesday became the last of the six major US banks to bail out of the Net Zero Banking Alliance, a group that was formed in 2021 whose members committed to cutting emissions from their lending and investment portfolios. JPM didn’t offer a specific reason for leaving the group. But it’s safe to assume the defections are a response to a political climate increasingly hostile to anything that smacks of woke-ism on Wall Street. Still, it’s not clear a more meaningful retreat is underway. Apart from leaving the group, the banks didn’t announce any changes to their existing plans to increase investments in the energy transition and decarbonize parts of their portfolios. That’s not to say that banks are perfectly aligned with an ideal climate future. But from its inception, NZBA was largely a marketing exercise. Members never planned to suddenly drop their fossil fuel clients. The group was never the malevolent anti-carbon cartel some Republicans made it out to be; neither was it a silver-bullet solution financing the energy transition. Banks exist to make money, and they serve the economy as it is, with limited powers to enact sweeping changes to other companies’ carbon footprints. NZBA was useful in helping banks coordinate on methods and standards for measuring and reporting their emissions. Now that most of them do that, the marketing upside of staying in the group may not be worth drawing the fire of anti-ESG crusaders. The real test for banks is how much more capital they’re willing to put on the table for the transition, whether they brag about it or not. “While this exodus might not ultimately — and certainly not immediately — impact net financial flows to energy transition projects,” said Vanessa Fajans-Turner, executive director of Environmental Advocates NY, “it certainly doesn’t inspire confidence, or pave the way for them to materially grow.” |
