“Right here, right now, finance draws the line,” Mark Carney, the UN Special Envoy for Climate Action, said on stage at the 2021 UN Climate Change Conference in Glasgow.

More than 160 financial institutions have signed up to a kind of climate finance super-group known as the Glasgow Financial Alliance for Net Zero (GFANZ). At the time, Carney – who is now the expected candidate for Liberal leader — called it a turning point for the energy transition.

But for some of those banks, the moment seems to have passed.

Parts of the UN-sponsored initiative — originally designed to get banks to align and share investment practices for net-zero goals — have seen significant withdrawal. One branch, the Net-Zero Banking Alliance (NZBA), has seen every major US bank cancel in the span of last month. The latest, JPMorgan Chase, offered no reason but said it “remains focused on pragmatic solutions to help further low-carbon technologies while improving energy security.”

Despite the NZBA’s subunit having grown to more than 140 banks – holding trillions of dollars in assets that experts say will be needed to transition away from environmentally damaging fossil fuels – there are now fears that the departures will trigger a larger exodus, including from large Canadian financial institutions.

Anti-ESG gap

Although none of the departing banks offered a reason for leaving, climate finance experts pointed to the elephant in the room.

“All American banks are afraid of Trump 2.0,” says Paddy McCully, a California environmentalist and senior analyst at the French nonprofit Reclaim Finance. “Their fear of being attacked by Trump far outweighs their commitment to the climate, so they all left the NZBA.”

In recent years, there has been a backlash against ESG investing – which follows environmental, social and governance principles – with US President-elect Donald Trump is actively campaigning against it.

It was also lawsuit and investigations by Republican lawmakers against investment giants like BlackRock. They argue that these climate initiatives are anti-competitive, because they pressure coal companies in the portfolio of companies to reduce their production in order to meet climate targets. That legal action was enough for BlackRock announces his departure from another branch of GFANZA Net Zero asset manager initiative.

Critics say this is not motivated by the public’s desire to see their money invested away from these causes.

“It’s not a real grassroots political movement,” says Adam Scott, executive director of Shift Action, a Canadian advocacy group focused on climate risks for pension funds.

“It’s a cynical attempt by the fossil fuel industry, in collusion with state governments, to try to slow down this inevitable transition that’s happening.”

Will Canadian banks follow us?

The same pressure, Scott says, doesn’t exist for Canadian banks. And for now, all major Canadian banks are still part of the alliance.

CBC News reached out to RBC, CIBC, Scotiabank, TD and BMO, which all complied with a joint statement from the Canadian Bankers Association, the lobby group that represents them.

Stating that the sector “recognizes the important role it can play in facilitating an orderly transition to a lower carbon economy”, he was non-committal about future participation in the alliance, saying it was something each bank decided on its own.

However, Bloomberg reported from an industry conference this week that some Canadian banks have left the door open to potential exits, with RBC’s chief executive saying “withdrawal from the NZBA, hypothetically, does not lead to net zero or climate change”.

Cold reality

The point of voluntary initiatives such as the NZBA is to coordinate and share best practices to harness all the purchasing power of banks, channeling it towards bringing the global economy to net zero emissions by 2050.

But in the years since joining such initiatives, some experts say the complexity of the task has sunk in.

“Progress has been obscured,” says Diane-Laure Arjaliès, at Western University’s Ivey School of Business, “because there have been new forms of climate exposure … new carbon emissions that weren’t really predicted. So it’s extremely difficult for them to commit to net zero right now. “

Critics also argue that many of these banks have made no progress in the years since 2021. Climate Chaos Reportpublished by a coalition of environmental groups, called JPMorgan Chase “the worst financier of fossil fuels,” with commitments for fossil fuel projects increasing “from $17.1 billion in 2022 to $19.3 (billion) in 2023.” in US dollars.

“It’s not necessarily a bad thing that a lot of those actors who were never serious about net zero are leaving,” Scott said, adding that it leaves a smaller, more committed group of leaders.

Net zero at the end

Scott, McCully and Arjaliès all agree that the European institutions, still members of the alliance, will carry the net-zero torch forward.

“The political pressure in Europe is more on banks to go further and be more ambitious than in North America, where it’s more in the opposite direction,” McCully said.

There is also less pressure, since there are not as many domestic fossil fuel industries, and more environmental regulations to hold these institutions accountable.

But regardless of their membership in the voluntary group, experts say banks will have to deal with the financial effects of climate change.

“It’s a very rational economic decision,” Arjaliès told CBC News from London, Ont. “Now we really need to change. Every day we wait is a lost opportunity and will be more expensive in the future.”