Earlier this month, as Nordic countries were hit with an unprecedented heatwave and wildfires in the US began spurting “fire clouds”, Barclays pulled out of the net zero banking alliance. The story may have seemed less alarming than extreme weather, but it has existential implications, as the finance sector quietly surrenders its former climate commitments.
The initiative forms part of the Glasgow Finance Alliance for Net Zero (GFANZ), a voluntary network of banks that Mark Carney, formerly the UN’s special envoy on climate action and now Canada’s prime minister, launched in 2021. At the time, the alliance, which encourages banks and asset managers to work towards the goals of the Paris agreement, seemed like an optimistic step in the right direction. Mr Carney described it as a “breakthrough”.
But times change. The election of Donald Trump, whose advisers have waged war on “climate fanaticism” and “woke” capitalism, has created an environment of impunity where businesses no longer need to even pay lip service to progress. Fossil fuel companies donated $19m to Mr Trump’s inauguration fund. So far, their investment has paid off. Mr Trump has withdrawn from the Paris agreement, used an “invented” energy emergency to justify the expansion of fossil fuels, opened public lands to drilling, and plans to cut funding for renewable energy.
With America reneging on climate action, businesses may feel they can relax. Barclays is the second British bank to leave the net zero alliance after HSBC quit earlier this year. Six of the largest US banks quit just weeks before Mr Trump’s inauguration. Some institutions have come under direct pressure from the right: BlackRock left the net zero asset managers initiative, another GFANZ group, after it was sued by Republicans who claimed its promotion of environmental, social and governance (ESG) goals had cut coal production. In each of his annual investor letters from 2020 to 2024, BlackRock’s chair, Larry Fink, namechecked climate change. His 2025 letter made no mention of it.
The deterioration of GFANZ reveals the weaknesses in relying on businesses to do the right thing. Its goals were always fuzzy: instead of calling for hard limits on the financing of fossil fuels, GFANZ encouraged banks to invest in low-carbon sectors. It has since drifted further from its mission, expanding its membership to companies without net zero commitments. Though it was never supposed to be a substitute for government action, inactive governments welcomed it. Boris Johnson, prime minister at the time of its creation, promised the alliance would help to “build back greener”.
Many green finance initiatives have less to do with preventing climate breakdown than minimising investors’ exposure to the risks this creates, such as carbon taxes or curbs on fossil fuels. “Green ethical investing”, writes Adrienne Buller, is a way of betting “on the likelihood of a greener economy, rather than contribute to bringing that economy into being”. When the risk of regulation wanes, as it has under Trump, so too does the impetus for this style of investing.
The lesson is that government action (and inaction) will determine the severity of the climate crisis. Governments need to prohibit fossil fuel extraction, reduce profits through progressive carbon taxes, support renewables and confront powerful interests. The myth that businesses are capable of self-policing has led to a dangerous delay.
