The second Trump administration is reshaping the global financial sector’s stance on climate change, as key financial institutions and industry groups begin to roll back commitments made in support of the net zero agenda. In the wake of the inauguration, major banks, asset managers, and industry groups are recalibrating their strategies to align with the new president’s “drill, baby, drill” policy, which includes a direct challenge to the environmental goals established by the Paris Agreement.
One of the most notable shifts came from the Glasgow Financial Alliance for Net Zero (GFANZ), a coalition launched with great fanfare during Cop26 in Scotland in 2021, aimed at mobilizing the financial resources necessary to meet the Paris climate goals. In January, GFANZ made a significant revision to its commitments, dropping the requirement for members to align their activities with the Paris Agreement. This change followed an exodus of several major U.S. banks from the alliance, signaling a broader shift in the financial sector’s commitment to climate action.
The move is seen as a direct response to President Trump’s climate policies, which have long been skeptical of efforts to decarbonize the economy. The president’s administration has made it clear that it plans to reverse many green policies, a move that has stirred fears among financial institutions about the potential political and legal repercussions of being seen as too active on decarbonization. BlackRock, the world’s largest asset manager with $11.5 trillion in assets, was among the first to quit the Net Zero Asset Managers (NZAM) initiative, citing confusion over its membership and legal inquiries from various public officials.
“Honestly, even if you look at politics around the world, it feels like the populist right is pushing hard on an anti-net zero ticket,” said James Alexander, CEO of the UK Sustainable Investment and Finance Association. “It is particularly disheartening to see this news come right at the time of the worst wildfires we’ve ever seen in Los Angeles, floods across the world, heatwaves… right on the eve of Donald Trump’s inauguration.”
The withdrawal of BlackRock and other financial giants has led to a suspension of NZAM’s monitoring process, with the organization announcing a review of its practices to adapt to the new global context. Analysts point out that while Trump’s return to power is the catalyst for many of these decisions, resistance from Republican lawmakers and the broader political climate in the U.S. have been building for some time.
However, despite the setbacks, experts warn that the political influence of major polluting industries, particularly oil and gas companies, is playing a significant role in the backlash against net zero initiatives. These companies, facing increasing pressure from the global energy transition, have mobilized resources to push back against decarbonization policies, leveraging their considerable financial power to sway public opinion and policy in their favor.
Andrew Garraway, head of climate policy at Risilience, noted that the growing resistance to climate finance is not solely attributable to Trump. “These alliances have faced increasing Republican opposition since their inception,” he said. “However, the Trump administration is now amplifying that opposition, making it a central issue in the U.S. financial landscape.”
As the U.S. pulls back from its global leadership role in climate finance, the international financial community faces a critical crossroads. If major financial institutions continue to retreat from climate commitments, it could undermine global efforts to finance the energy transition and achieve the targets set by the Paris Agreement. However, the pushback also highlights the powerful influence of entrenched fossil fuel interests, which continue to shape the direction of global financial policy.
Paddy McCully, senior energy transition analyst at Reclaim Finance, said, “The symbolic nature of these commitments might be weak, but the message is clear: Wall Street’s retreat from financing the energy transition sends a signal to big polluters that they can continue business as usual.”
For now, the financial sector is caught between political pressures and the growing urgency of the climate crisis. As climate events become more severe, the tension between economic interests and environmental action will likely intensify, raising critical questions about the role of finance in tackling climate change in the years to come.
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