By Abdullahi Lukman
As Donald Trump assumes his second term, his administration’s anti-climate policies are already impacting global efforts to achieve net zero emissions.
Major U.S. financial institutions are withdrawing from climate alliances, signaling a retreat from commitments aimed at aligning the financial sector with the Paris Climate Agreement.
One of the most significant setbacks came when the Glasgow Financial Alliance for Net Zero (GFANZ) dropped its requirement for members to meet Paris-aligned goals.
This move follows the exit of key U.S. firms, including BlackRock, the world’s largest asset manager, which pulled out of the Net Zero Asset Managers (NZAM) initiative due to legal pressures and confusion over its climate commitments.
These developments come at a time of unprecedented global climate crises, with 2024 being declared the hottest year on record, soaring atmospheric carbon levels, and extreme weather events, such as wildfires in Los Angeles.
Despite these alarming signs, the U.S. financial sector is increasingly distancing itself from climate action, spurred by political forces, including Trump’s aggressive pro-fossil fuel stance.
Analysts point to a broader trend in which U.S. financial firms are wary of supporting climate initiatives, fearing political backlash and legal ramifications, especially with the incoming Trump administration’s “drill, baby, drill” agenda.
James Alexander, CEO of the UK Sustainable Investment and Finance Association, expressed concern that this shift would have a detrimental impact on climate finance, particularly as political attacks on green policies intensify.
While some attribute the setbacks at GFANZ and NZAM to growing Republican resistance, others argue that Trump’s presidency has acted as a catalyst for this retreat.
With the oil and gas industries—some of the wealthiest and most politically powerful sectors—leading the charge against the net zero transition, U.S. firms are increasingly aligning themselves with these interests, signaling a major challenge for global climate goals.
Despite the optimism that initially surrounded GFANZ’s creation at COP26, the departure of major financial players and the weakening of their commitments to climate goals indicate a significant shift in global financial markets.
While some of these initiatives were already criticized for their weak enforcement mechanisms, the retreat sends a clear message to the global market: fossil fuel industries, particularly in the U.S., are pushing back against climate regulations and the clean energy transition.
The move also highlights the challenges facing the financial sector in balancing climate ambitions with the powerful political and economic forces resistant to change.
As Trump re-enters the political stage, the future of both U.S. financial climate commitments and global climate action hangs in the balance.