Goldman Sachs Group Inc. is quitting a major climate group for banks, as increasingly complex regulations and US political attacks lead some of the financial industry’s biggest firms to rethink such affiliations.
The bank’s decision to leave the Net-Zero Banking Alliance was mainly motivated by the need to comply with mandatory reporting guidelines, according to a person familiar with the matter who asked not to be identified discussing internal deliberations at the bank. The person pointed to the rollout of the European Union’s Corporate Sustainability Reporting Directive as a key development guiding Goldman’s approach to the matter.
Goldman said in a statement on Friday that it’s “very focused on the increasingly elevated sustainability standards and reporting requirements imposed by regulators around the world.” The firm has been laying the groundwork for its departure from NZBA for a while now and clients and stakeholders have been consulted, the person familiar with the decision said.
A spokesperson for NZBA declined to comment.
The Goldman announcement emerged on the same day that money manager Franklin Templeton said it’s leaving Climate Action 100+, another group formed to press companies to cut emissions.
NZBA sits under the Glasgow Financial Alliance for Net Zero, whose unveiling of $130 trillion of financial-sector commitments to net zero was one of the highlights of the COP26 climate summit in Scotland in 2021. Back then, major banks, including JPMorgan Chase & Co. and Citigroup Inc., proudly announced their membership as climate finance morphed into one of Wall Street’s most popular new areas.
As time went on, however, climate coalitions started to face internal tension as some members balked at the prospect of committing to explicit financing requirements. That was followed by a slump in green asset values, and an increasingly aggressive political backdrop in which so-called woke capitalism was vilified by the Republican party as a distraction from fiduciary goals.
At the same time, firms have been struggling to adapt to a deluge of environmental, social and governance requirements being enforced by regulators in key markets. The EU’s disclosure framework is the furthest advanced and also the widest reaching in scope. As a result, even companies based outside the bloc need to observe EU rules if they’re targeting clients there.
In its statement, Goldman said the firm’s priorities “remain to help our clients achieve their sustainability goals and to measure and report on our progress.”
The departure from NZBA coincides with intense and growing pressure from the Republican Party on anything that smacks of ESG. Last week, Texas Attorney General Ken Paxton led a move to sue BlackRock Inc., Vanguard Group Inc. and State Street Corp. for allegedly breaching antitrust laws by using climate-friendly investment strategies to suppress the supply of coal.
That suit followed bans against ESG investing across numerous Republican states, with pressure expected to step up now that Donald Trump is headed for a second term in the White House.
Against that backdrop, other climate finance groups have been losing members. In August, the asset management arm of Goldman said it had quit CA 100+. Other firms to have left the coalition include State Street Global Advisors, Pacific Investment Management Co. and — most recently — Franklin Templeton, which manages about $1.6 trillion of assets.
A spokesperson for CA100+ said that while the group is “disappointed” with the departures, it respects each investor’s decision.
A separate climate alliance for insurers, NZIA, was gripped by an exodus last year, as firms responded to threats of antitrust litigation brought by Republican state attorneys general. And a net zero coalition for asset managers suffered a blow when Vanguard, the world’s second-largest money manager, quit back in 2022.
Goldman’s decision to withdraw from NZBA marks the group’s highest-profile loss to date. It was able to avert a potential walkout by a group of key members two years ago, Bloomberg has previously reported. JPMorgan, Morgan Stanley and Bank of America Corp. all raised the prospect of quitting, people familiar with the matter said at the time. They ended up staying in the group after NZBA updated its guidelines to give members the freedom to ignore a proposal to phase out the financing of fossil fuels.
Spokespeople for JPMorgan and Morgan Stanley declined to comment. Spokespeople at BofA haven’t yet responded to requests for comment.
NZBA asks members to agree to work toward net zero financed emissions by 2050, and to set interim five-year targets toward that goal. CSRD, meanwhile, is an environmental and social sustainability reporting framework.
“The alliances may have been useful in centering the issues, helping to underscore that finance is a central challenge in the energy transition,” said Lisa Sachs, who heads Columbia University’s Center on Sustainable Investment. “But they didn’t really help to solve the problem.”
The apparent fraying of voluntary climate groups linked to GFANZ isn’t necessarily a sign that Wall Street is abandoning the green agenda, according to David Carlin, the former head of risk at the United Nations Environment Programme Finance Initiative, which convened the NZBA.
“It’s a shame to see leading institutions leave these alliances,” he said. “But it’s important to note they aren’t repudiating their net zero commitments.”
Such coalitions help firms “share best practices and consider how to manage the challenges of the transition,” Carlin said. “However, firms are constantly weighing these benefits against the political heat of poking their heads above the parapet on climate.”
At the same time, “the opportunities for investing in the energy transition are increasing,” Columbia’s Sachs said. “There’s more financing of green technologies.”
Goldman said it has made “significant progress” in recent years on its net zero goals, “and we look forward to making further progress.” That includes “expanding to additional sectors in the coming months,” the firm said.
Goldman Chief Executive Officer David Solomon said in the firm’s latest sustainability report that Goldman will file a global firm-wide report next year under the EU’s CSRD, becoming one of the first US banks to do so.
“This new requirement is expansive in scope, covering not only our financial exposure but also our environmental and social impact,” he said.
(The NZBA is part of the Glasgow Financial Alliance for Net Zero, which is co-chaired by Mark Carney, who is chair of Bloomberg Inc. and a former Bank of England governor, and Michael R. Bloomberg, the founder of Bloomberg News parent Bloomberg LP.)
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