Major US banks leave the Net-Zero Banking Alliance as Canadian banks manage ESG pressures without confirming membership
Several major US banks, including Morgan Stanley, have exited the Net-Zero Banking Alliance (NZBA), as reported by The Globe and Mail.
The NZBA, formed in 2021 under the Glasgow Financial Alliance for Net Zero (GFANZ), aims to mobilize capital to reduce greenhouse-gas emissions and transition to a low-carbon economy.
The banks’ departure comes amid increasing backlash against environmental, social, and governance (ESG) measures in the US, particularly from Republican-led states.
Morgan Stanley announced its withdrawal from the NZBA without providing specific reasons.
Carrie Hall, a spokesperson for Morgan Stanley, emphasized the bank's continued commitment to net-zero goals, stating that the institution aims to support decarbonization efforts by advising and financing clients’ transitions.
Other US banks, including Bank of America, Citigroup, Wells Fargo, and Goldman Sachs, left the alliance in recent months. These institutions stressed that their departures did not signal a shift away from net-zero objectives.
Bank of America highlighted that CEO Brian Moynihan remains part of GFANZ’s principal group, which sets strategy. Citigroup reaffirmed its support for GFANZ's efforts to ease capital flow into emerging markets.
Daniel Storey, NZBA’s spokesperson, declined to comment on the US banks' exodus or its implications for the alliance’s future.
The exits coincide with growing political opposition to ESG in the US Republican-led states, including Texas, Florida, and West Virginia, have implemented policies penalizing financial institutions using ESG strategies, arguing such measures harm fossil fuel industries.
In November, Texas Attorney-General Ken Paxton filed a lawsuit against BlackRock, State Street, and Vanguard, accusing the firms of anti-competitive practices aimed at limiting the coal industry.
These firms, part of the Net Zero Asset Managers initiative under GFANZ, denied the allegations, describing them as baseless.
The House Judiciary Committee, led by Republican Jim Jordan, announced in June it would investigate whether financial institutions were part of a ‘climate cartel’ colluding to impose ESG goals on US companies. It questioned whether existing antitrust laws sufficiently deterred such practices.
Canadian banks have also faced scrutiny due to ESG-related policies. Royal Bank of Canada (RBC) and Bank of Montreal (BMO) assured governments in Texas and West Virginia that they would not stop lending to oil and coal industries.
The Canadian Bankers Association (CBA) did not confirm whether Canadian banks remain part of the NZBA but emphasized that each institution develops and reports on its own climate strategies.
Maggie Cheung, CBA spokesperson, reiterated the sector’s role in supporting a collaborative transition to a low-carbon economy.
RBC, BMO, Bank of Nova Scotia, and Canadian Imperial Bank of Commerce declined to comment on their NZBA commitments. Toronto-Dominion Bank and National Bank of Canada did not respond to requests for comment.
The NZBA has faced internal challenges.
In 2022, several US banks, including Morgan Stanley and Bank of America, considered leaving the alliance due to concerns over potential legal risks tied to divestment from high-emission sectors.
Canada’s Big Six banks expressed similar concerns, noting governance risks and the impact of withdrawing support for oil and gas clients, a significant part of Canada’s economy.
The NZBA later clarified that the alliance does not hold decision-making power over its members, addressing some of the concerns raised by banks.
