View / Wall Street’s climate coalition suspends activities

Wall Street’s climate coalition is drawing its last breaths, and that may be a good thing.

The Net-Zero Banking Alliance will suspend its activities, the group said on Wednesday, pending a vote next month by its few remaining members on whether it should continue to exist. What started in 2021 as a venue for green virtue signaling quickly ran into trouble as shareholders and Republican politicians balked at the notion of banks making choices based on climate aspirations rather than profit demands. Most of the big US members bailed this year, and European members were rumored to be next out the door.

In a sense, the group’s collapse doesn’t change much: It “never truly challenged the fossil fuel-oriented business models of major banks,” Lucie Pinson, the founder of climate nonprofit Reclaim Finance, told the Financial Times; in the last decade, global banks have lent about $1.50 to fossil fuels for every dollar they’ve lent to green energy, according to Bloomberg.

Still, that ratio is slowly shifting; there is plenty of money for banks to make in the energy transition. Coalitions like NZBA arguably did more harm than good by drawing political heat to genuinely profitable and climate-benefitting investments, and, on the left end of the political spectrum, by giving reputational cover to the most laggard members. Going forward, banks should focus on notching tangible green finance wins and not get bogged down in PR.

“I don’t see this as a pulling-back of actual work being done,” Cary Krosinsky, a sustainable finance lecturer at Yale University’s Center for Business and the Environment, told me. “It’s just that there was way too much focus on vague concepts like net zero pledges that no one actually knows how to fulfill.”