Fulfilling an oft-reiterated campaign promise, President Donald Trump has ordered the withdrawal of the US from the Paris Agreement, the compact under which 194 countries pledged to limit global warming to 1.5 degrees Celsius by the end of the century.
A few days before Trump signed the order from the stage of a Washington, D.C., sports arena, Bank of America, Citi, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo announced their retreat from the Net Zero Banking Alliance, a coalition formed by the UN in 2021 to reduce carbon emissions.
As if the exodus of American banks was not enough, five Canadian neighbors joined them: BMO, CIBC, National Bank of Canada, Scotia Bank, and TD Bank. Meanwhile, the world’s largest asset manager, BlackRock, abandoned a sister initiative, the Alliance for Net Zero, which brought together firms that collectively hold $130 trillion of assets under management.
The second great US retreat—the first being Trump’s 2017 withdrawal, which the subsequent Biden administration reversed—will have an immediate impact on other international efforts to curb global warming. The US bankrolls 21% of the budget for the UN Climate Secretariat, which leads climate change negotiations. National and international spending by the private and public sectors combined reached $175 billion annually in 2021 and 2022, thanks to the Inflation Reduction Act, signed into law by President Joe Biden.
At least a portion of this funding will disappear.
Additionally, Trump promises to erase the US’s national emissions-cutting plan. Tax credits for C02-reduction projects, manufacturing targets for electric vehicles, and offshore wind leases could also be suspended. Some US states, such as California, claim they will continue their climate efforts.
American bankers are in a delicate position. They don’t want to annoy elected Republican officials, who are feared advocates of the oil and gas industry, but at the same time they cannot alienate their EU clients. Companies must adopt stricter climate targets on the old continent to comply with European reporting rules.
Will American banks risk losing these clients? The Net Zero Banking Alliance still boasts more than 130 member institutions ready to offer services.
