By Faridat Salifu
As the global fight against climate change intensifies, a growing divide has emerged in the world of finance.
Major U.S. banks, including JPMorgan Chase, have recently withdrawn from a pivotal climate finance initiative, the Glasgow Financial Alliance for Net Zero (GFANZ), igniting concern that political pressures are sidelining climate action in the financial sector.
Launched in 2021 under the leadership of Mark Carney, the UN special envoy for climate action, GFANZ aimed to unite more than 160 financial institutions in an effort to accelerate the shift toward a net-zero economy by 2050.
However, over the past month, every major U.S. bank in the initiative’s Net-Zero Banking Alliance (NZBA) has quietly exited. JPMorgan Chase’s departure, with no official explanation, follows in the footsteps of other giants like Goldman Sachs and Citigroup, leading to growing fears that the initiative is unraveling.
Observers are quick to point to the political climate in the United States as a key factor.
In recent years, former President Donald Trump and conservative lawmakers have mounted a vocal campaign against environmental, social, and governance (ESG) initiatives, which aim to prioritize sustainability in investment strategies.
Trump, a known critic of climate-focused financial regulations, has pledged to reverse ESG policies if re-elected. Amid this political backlash, critics argue that banks are caving to pressure from right-wing factions, fearing backlash from politicians and customers aligned with Trump’s anti-ESG stance.
“It’s clear that these banks are more afraid of Trump’s political influence than they are of climate change,” said Paddy McCully, a senior analyst at the environmental non-profit Reclaim Finance, adding, “Their exit from GFANZ is a direct response to the fear of being targeted for supporting climate action.”
The decision by U.S. banks has implications far beyond the financial sector. Climate advocates argue that the loss of financial institutions committed to sustainable investing could undermine the global push for decarbonization.
Research suggests that trillions of dollars in investments are required to shift the world economy away from fossil fuels, making the alignment of financial institutions with net-zero goals critical to meeting global climate targets.
Despite this, Canadian banks have largely resisted similar pressures. As of now, all of Canada’s major financial institutions RBC, CIBC, Scotiabank, TD, and BMO remain committed to the NZBA.
The Canadian Bankers Association issued a statement emphasizing the sector’s role in facilitating the transition to a lower-carbon economy, though it refrained from commenting on whether individual banks might leave the alliance in the future.
“There’s much less political pressure in Canada compared to the U.S.,” said Adam Scott, executive director of Shift Action, a Canadian environmental advocacy group.
“Canadian banks are still largely in step with the global climate finance movement.”
Nevertheless, signs of hesitation are emerging.
RBC’s CEO recently suggested that pulling out of the NZBA would not signal a lack of commitment to net-zero goals, hinting that Canadian banks could eventually reconsider their involvement if the political and economic landscape shifts.
Financial experts acknowledge that while the U.S. banks’ departure is a blow to the global climate effort, it may lead to a more focused and determined group of financial institutions.
“The banks that remain in GFANZ are those that are truly committed to making a difference,” said Scott, adding, “If some of the less serious players leave, that could ultimately strengthen the movement.”
Meanwhile, European banks, which have not faced the same level of political resistance, continue to lead the charge on climate finance.
With stricter environmental regulations and a stronger societal push for action, financial institutions in Europe are expected to play a central role in advancing the net-zero transition.
Despite the setbacks in North America, experts agree that the financial sector’s role in addressing climate change remains paramount.
“It’s not just an ethical imperative, it’s an economic one,” said Diane-Laure Arjaliès, a business professor at Western University’s Ivey Business School, adding, “The longer we wait to act on climate change, the more costly it will be. The financial sector has to be part of the solution.”
As the debate over ESG intensifies, all eyes will be on the actions of both U.S. and Canadian banks in the coming months to see whether the global financial community can maintain its momentum toward a sustainable, low-carbon future.