JPMorgan's withdrawal from the net-zero banking alliance is the sixth such move by a major U.S. bank since early December 2024, when Goldman Sachs was the first bank to announce its withdrawal from the alliance.
Other big players including Wells Fargo, Morgan Stanley and Citigroup have since opted out of the NZBA, citing concerns about a political backlash from pro-fossil fuel Republican politicians who believe the alliance threatens the future of U.S. oil and coal. While the NZBA remains healthy, with 141 members including all the largest European banks, the abandonment of environmental, social and governance (ESG) initiatives by the largest US banks has raised concerns about the future of sustainable finance.
While ESG has become a buzzword in recent years, its underlying principles have been discussed for decades; the importance of minimizing the environmental and local impact of corporate activities, as well as transparent and fair governance principles such as equal pay and equality Chance.
The impact of ESG initiatives on company performance is unclear; following these guidelines often hurts a company's bottom line by limiting revenue-generating activities and incurring higher costs, but these effects may be offset by engaging consumers concerned about environmental and social justice issues .
Despite media reports of changing consumer attitudes, especially among younger generations, support for ESG principles remains in the minority. GlobalData's 2024 Financial Services Consumer Survey shows that globally, 57.1% of investing consumers would rather receive the highest possible returns than invest in companies that consider ESG. The figure is even higher in the US, with 61.6% of consumers preferring maximum returns, which may have been a driving factor in the bank's decision to withdraw from the NZBA.
(Source: GlobalData 2024 Financial Services Consumer Survey)
More data from GlobalData Competitor Benchmarking The survey shows that 79% of consumers are satisfied with their major bank's ESG approach. This relatively high number, coupled with the fact that ESG has just cracked the top 10 issues that consumers care about, may lead banks to believe that the costs associated with ESG initiatives far outweigh the benefits. Although a majority of consumers claim to be strong supporters of social justice and environmental ideals, only 17% consider ESG principles when choosing a major bank, suggesting that the importance of ESG is outweighed by other indicators such as product range and quality, price and environment). Customer Service Products.
Negative attitudes toward ESG principles are not limited to consumers, but are also prevalent in corporate settings. GlobalData's ESG Sentiment Poll conducted in Q4 2024 highlighted executives' attitudes toward these principles, showing that the vast majority of businesses do not view ESG as impactful. Only 8% of executives believe ESG will be an influential topic for their business in the next 12 months, compared with 38.1% and 31.5% for high inflation and geopolitical instability respectively. This reinforces the view that ESG is not considered a critical issue for company performance. In fact, 57.9% of executives believe ESG is just a marketing exercise, while only 4% believe their company is fully committed to ESG. Given that adopting ESG principles does not improve financial performance and is not highly valued by consumers, companies have little incentive to adhere to values that incur higher costs and constrain business activities.
(Source: GlobalData Thematic Intelligence: 2024 Q4 ESG Sentiment Poll)
While the banking industry itself does not have a large environmental or social footprint, the activities facilitated through lending and access to credit are often inconsistent with net zero commitments. According to the Rainforest Action Network, JPMorgan Chase, the largest fossil fuel financier, has spent more than $430 billion since the Paris Agreement was signed, and the world's 60 largest banks have invested more than $6.9 trillion in the industry.
It is increasingly clear that the high returns on fossil fuel investments are more attractive to large banks than riskier, less profitable alternative fuel options such as renewables, resulting in more sustainable options being excluded from producing emissions, destruction Beyond the landscape and environmentally damaging energy. health of workers and local residents. If credit providers continue to support these industries, there will be little that companies in other industries can do to reduce their impact on the planet and their local environment, reducing ESG considerations to a footnote in company reports or to a buzzword unsupported by any company. Meaningful policies.
Jonathan Vaughan Burleigh is an Associate Analyst in the Banking and Payments Group at GlobalData
"Six Major U.S. Banks Exit Net-Zero Banking Alliance" was originally created and published by Retail Banker International, a brand of GlobalData.
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