With the Environmental, Social, and Governance (ESG) movement losing support, major U.S. banks are withdrawing their membership from outfits like the Net-Zero Banking Alliance (NZBA).
Morgan Stanley, Citi, and Bank of America (BofA) recently announced their exit from the United Nations (UN)-backed coalition of banks that have committed to net-zero finance practices. Goldman Sachs and Wells Fargo formally exited NZBA last month. This development is largely attributed to the successful Republican-led pushback to ESG efforts and a renewed interest in fossil fuel investments ahead of the second Trump administration.
Morgan Stanley offered no official statement on their decision to withdraw from NZBA yet stated, “We aim to contribute to real-economy decarbonization by providing our clients with the advice and capital required to transform business models and reduce carbon intensity.”
Citi and BofA issued similar statements publicly backing away from ESG investing.
The NZBA originally launched in 2021 with Citi and BofA as founding members. At its peak, the coalition boasted 140 banks, representing 44 countries, committed to “aligning their lending, investment, and capital markets activities with net-zero greenhouse gas emissions by 2050.”
This is also not the first ESG coalition to face scrutiny. Two of the “Big Three” financial asset managers, State Street and JP Morgan Chase, exited ESG investor coalition Climate Action 100+ in February 2024.
As I documented here at IWF, ESG funds don’t perform better than non-ESG funds:
ESG funds generally “perform poorly.” An assessment by Columbia University and the London School of Economics of self-identified ESG mutual funds versus non-ESG mutual funds tracked from 2010 to 2018 determined the former had worse environmental, social, and governance metrics than non-ESG ones.
Unsurprisingly, ESG—backed by Biden-Harris administration net-zero climate policies—invited environmental inflation (en-flation) across these past four years.
A 2019 Business Roundtable statement on corporations redefining their purpose is returning to haunt some Wall Street firms. Americans are souring on these practices because they are political, risky, and not financially sustainable. It’s well-documented that ESG investing practices have a poor return-on-investment (ROI) and don’t inspire better environmental practices. At best, ESG is a marketing slogan.
Our Center for Energy and Conservation will continue to actively engage in the ESG fight and has many resources available online.
To learn more about ESG investment practices and their shortcomings, go HERE.