In the run-up to US President Donald Trump’s inauguration, a slew of US and Canadian banks and asset managers withdrew from climate action-related alliances, accelerating the pace at which North American financial institutions have cut and run from their climate commitments in light of what is euphemistically referred to as “developments in the US”.
BlackRock, the world’s largest asset manager, withdrew from the Net Zero Asset Managers Initiative (NZAM) in early January. BlackRock is the most prominent of the US financial institutions that have found themselves in the firing line of Republican-led states waging a war on what they call “woke capitalism”.
South African asset managers had largely steered clear of NZAM, except for Ninety One and Old Mutual Investment Group, neither of which has indicated any intention to withdraw.
But this may soon be a moot point. In the wake of BlackRock’s withdrawal, NZAM has removed the “commitment statement and list of signatories” from its website, suspended its work tracking “signatory implementation and reporting”, and announced “a review of the initiative to ensure NZAM remains fit for purpose in the new global context”.
The truth is that whether you lament or support these developments, it is questionable whether NZAM and others like it, including Climate Action 100+, the Net Zero Banking Alliance, and the (already defunct) Net Zero Insurance Alliance, have had much success in what they set out to achieve: the mitigation of climate risk.
Since the Paris Agreement was adopted in 2015, the world’s 60 biggest banks have committed almost $7-trillion to the fossil fuel industry. Oil and gas companies have major expansion plans in every corner of the globe. Insurers continue to back fossil fuel projects, while making it harder for ordinary people to afford insurance against extreme weather events.
While the intentions of the initiators of these alliances were no doubt noble, the commitments and pledges made under their auspices have given the financial sector immensely useful cover, creating a false perception of action which has undoubtedly harmed global prospects of tackling climate change.
In other words, these networks and alliances, which have only ever required voluntary commitments and exercised no enforcement over their implementation, have facilitated industrial-scale greenwashing.
I have no doubt that many financiers are cheering the advent of a new world order which removes the obligation to pretend that they care about climate change and in which they can now focus unhindered on what they’ve always prioritised anyway: short-term profits.
But the irony is that US financial institutions are abandoning even the appearance of taking action to reduce global emissions at exactly the moment when “the material financial risk of climate change” is becoming undeniable to even the most ideologically blinded.
The US National Centers for Environmental Information tracks the number of billion-dollar natural disaster events (CPI-adjusted) that happen in the US each year. In 1980 there were three of these. In 2024 there were 27. Hurricanes Milton and Helene alone caused $60bn and $55bn in damage respectively. The January 2025 wildfires in southern California look set to break all previous records, with the Los Angeles Times recently reporting estimates of damage and economic loss of $250bn-$275bn.
Attributing extreme weather events to climate change is complex, but if there is one lesson the world has learnt by now it is that evidence and facts have no bearing on ideology, political will or the boundless ingenuity of human greed. US policy on all fronts is increasingly driven by what Nobel prize winner Paul Krugman recently described as “the rage some Americans feel at any suggestion that people should change their behaviour for the common good”.
Perhaps the expected demise of NZAM and its ilk will usher in a more realistic era of acceptance that there is no hope of US leadership on climate change and that the rest of the world must forge a path based on concrete action rather than empty promises.
Even so, this will place us increasingly on the trajectory of the “fragmented world climate scenario”, modelled by yet another alliance, the Network for Greening the Financial System. This scenario — which is actually more optimistic than the trajectory we are on with current policy commitments — posits that “delayed and divergent climate policy ambition” leads to “high physical and transition risks”.
Not even bankers and asset managers will be immune.
This article was first published in the Financial Mail on 13 February 2025.
