“Bank holiday”, By IRINA SLAV

“ Everyone’s heard the news by now. The six biggest U.S. lenders have quit the Net-Zero Banking Alliance.”

Bank holiday

IRINA SLAV

JAN 20, 2025

Everyone’s heard the news by now. The six biggest U.S. lenders have quit the Net-Zero Banking Alliance. So have four of the biggest Canadian banks. Reports about the quitters abound, citing a net zero of specific reasons for the moves. What the reports cite are all these banks’ assurances they would remain on the path of the righteous net-zeroist despite their withdrawal from the NZBA.

“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,” Morgan Stanley said.

“We will continue to work with clients on this issue and meet their needs,” Bank of America told Reuters.

“The NZBA was formed at a time when the global industry was scaling up efforts to take action on climate, and served a valuable role in galvanizing these efforts and establishing momentum,” Canadian Imperial Bank of Commerce said.

“As this space has evolved and matured, and having made significant progress alongside our clients in these areas, we are now well-positioned to further this work outside of the formal structure of the NZBA,” CIBC neatly concluded.

Essentially, they’re all saying the same thing, namely that they don’t really need any more encouragement because they’re doing so well on net zero already. Meanwhile, the media reporting on their exodus are also saying the same thing which is а different thing from the banks’ thing: it’s all because of Trump and the rise of the right outside the U.S. as well. The banks are facing growing pressure from anti-transition forces, they write, so they’re caving.

That’s a simple explanation but there’s a simpler one. It’s called money.

Germany’s economy shrank by 0.2% last year, with exports down by 0.8%. This was the second year of GDP shrinkage in a row and it was really hard to make it sound good. Not that some didn’t try.

“Cyclical and structural burdens stood in the way of better economic development in 2024,” the president of Germany’s statistics office, a lady by the name of Ruth Brand said, as quoted by Reuters.

Others were blunter. “Germany is going through by far the longest phase of stagnation in post-war history,” per Timo Wollmershaeuser, head of forecasts at Ifo, the economic research think-tank. “It is also falling behind considerably in an international comparison.”

“There are currently very strong indications that 2025 will be the third year of recession in a row,” an economist from local bank LBBW said.

In completely unrelated news, the UK’s economy grew by a modest but apparently impressive 0.1% in November and is expected to post a no less impressive 0.9% growth rate for full 2024, according to the International Monetary Fund. The number, incidentally, is a downward revision from an earlier forecast for 1.1% growth.

And here’s another perfectly unrelated piece of news, courtesy of the Financial Times. “Donald Trump has threatened the EU with a trade war unless it buys more US oil and gas. But despite Brussels signalling openness to the idea, it has no power to buy — and European countries are importing record volumes of cheaper liquefied natural gas from Russia.”

This reminds me of an old Russian joke that goes like this. President Yeltsin (of all people) decides to start a campaign against alcoholism, so he bans drinking at the workplace. He goes to some factory or other to check on progress and asks a random worker if he drinks. “I do,” the worker admits, “but I do it with disgust.”

EU gas buyers must be feeling similar emotions as they place their orders for LNG from Yamal and yet they keep placing these orders because, to quote that eponym of delicacy the FT, “Price sensitivity is a major issue.”

Now what could events in Europe possibly have to do with the totally independent decisions by ten North American banks to quit a net-zero alliance dedicated to a concerted effort to steer the whole wide world into a less gassy, less oily direction? Well, everything.

All these banks are watching what’s happening in Europe. They are, in other words, watching how the transition progresses in real time. Germany and the UK are by far the most ambitious transitioners in the bunch. And they’re destroying themselves. That’s a case study right there and banks are avid learners when it comes to their future profits.

Of course, this is not an eиther/or situation. I’m sure they are rather nervous about Trump in Washington and, possibly and maybe even likely, Pierre Poilievre in Ottawa. But, and that’s a big, fat and glorious but, they are more nervous about their money. Because what the economic growth situation in Germany and the UK demonstrates empirically is that even billions upon billions upon billions of subsidies cannot make wind, solar, and EVs viable in even limited free-market conditions as replacement for coal, oil, and gas.

It’s a rather short lesson, really. And it’s a simple one. Hydrocarbons make economies grow. Wind and solar don’t — unless they’re in Spain, which also happens to be a tourist hotspot. No, really, Spain is doing much, much better than either Germany and the UK, and it is actually exporting electricity. But of course there’s a but. The biggest contribution to this growth is tourism rebound after the lockdowns and that’s going to fizzle out, analysts predict. As for wind and solar, well, Spain also has a lot of nuclear, what can I say.

Back to the banks that are watching the transition game, here’s that quote from Morgan Stanley again, because I want to make a point and also catch them lying: “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.”

Like hell you do. Your only aim is to contribute to your very own bottom lines and “helping” clients decarbonise is not going to make that contribution. Banks are at the saving-face phase right now. They will keep their net-zero website pages full of commitments and assurances they are good boys and girls while slowly reducing the amount of capital available to, say, wind developers.

Yes, Trump wants to ban those. But that’s not an excuse if you’re committed to net zero, now, is it? You could lobby Trumpians to convince The Man to not ban them. But for this, wind turbines have to make economic sense. And they don’t. Which is why those banks are fleeing the net-zero abbreviations en masse.

But what about European banks? Well, they are late to the quitting party but they are on their way, stuck in a traffic jam probably because of JSO protesters glued to the street. Per the FT, again, because I love to imagine the wincing as they wrote this: “European banks have threatened to pull out of the sector’s largest climate alliance unless it softens its rules, as executives on both sides of the Atlantic fret about the future of net zero collaboration ahead of Donald Trump’s inauguration.”

It gets even funnier, because the Glasgow Financial Alliance for Net Zero is next. The group, set up by one Mark Carney and one Michael Bloomberg, is having trouble convening a meeting amid “scheduling issues, antitrust concerns and political distractions, according to people familiar with the situation. A meeting has instead been provisionally scheduled for early next month.”

To sum up, net zero is not making banks any money. It is costing them money. It’s not about Trump and Republican attorney generals. Okay, to be more accurate and fair, it’s not just about them. It’s about the cash. If the transition was making money, bankers would be fighting for it — you know, the way they are fighting to keep doing business with oil and gas. Instead, they are quitting in droves. The ideological wing of the transition party is naturally freaking out — and their idea for dealing with the exodus is one you’d never guess in a million years.

“These exits reveal the inadequacy of voluntary commitments and underscore the urgent need for state-level leadership and regulation to protect state and national climate progress and economic stability,” one Vanessa Fajans-Turner, executive director of Environmental Advocates NY, told ESG Dive.

Another climate crusader, the head of Reclaim Finance, suggested European banks double down on net zero and demand even stronger commitments from other NZBA members, or, as she put it, “push NZBA for more ambition.”

That’s right. More mandates, please. More ambition. Because the ones we already have are working so well Germany’s broke, the UK is about to go broke, and the rest of Europe is going to get dragged down with them except for Norway. Yes, pile on the mandates and the ambitions, it will hasten the inevitable end.