Last year the Earth reached its highest average temperature in human history. Countries around the world have set the ambition of heading off climate catastrophe by reducing net greenhouse gas emissions to zero by around 2050. But with the US Trump administration abandoning the effort, an already slim chance of success has become even smaller.
When Mark Carney, the former governor of the Bank of England and of Canada’s central bank, announced in April 2021 the launch of the Glasgow Financial Alliance for Net Zero, the initiative appeared to be a shrewd tactic: hitch the resources of the global financial industry to efforts to curb emissions of greenhouse gases — thereby driving the global economy on a path to ending the build-up of fresh carbon dioxide in the atmosphere by the middle of this century.
The concept of net zero emerged in the 2010s as an easily understood target for national and global initiatives to apply brakes to the impact of climate change by stabilising the concentration of carbon dioxide and other greenhouse gases in the Earth’s atmosphere.
It first came to prominence in the 2014 report of the United Nations’ Intergovernmental Panel on Climate Change, which declared that to limit warming to less than 2°C above pre-industrial levels would require near zero emissions of carbon dioxide and other greenhouse gases with long-term persistence in the atmosphere by the end of the century. By the time the Paris Agreement was concluded by 196 countries in December, the goal for reaching net zero had been brought forward to the mid-21st century.
Ultimately, reducing greenhouse gas emissions is down to the companies, industries and technologies that generate them – above all the applications of fossil fuels throughout the 21st century economy, from electricity generation to high-emission industries such as steelmaking and cement manufacture, and transport: petrol- and diesel-engine cars and trucks, fuel oil used by shipping and the kerosene that powers aviation.
Shaping business choices
But Carney’s vision was that ultimately the impetus for reducing emissions would come not just from state and privately-owned companies caught between public pressure to reduce damage to the climate and commercial imperatives, but critically from the financial industry, which had the ability to shape business choices through its decisions on lending, investment and bond underwriting.
The United Nations Climate Change Conference (COP26) in Glasgow in October and November was focused on the role of financial institutions in addressing global warming. Carney – today Canada’s newly-installed prime minister – reported that the coalition of international financial groups he had marshalled behind the net zero initiative consisted of more than 450 banks, insurers, asset managers, service providers and institutional investors in 45 countries overseeing up to $130trn of private capital.
Investment managers accounted for $57trn of the assets, with another $63trn held by banks and $10trn by asset owners such as pension funds. Carney promised that together, members of the alliance could provide as much as $100trn of financing to help countries worldwide embrace the transition to net zero emissions by 2050 – “the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account.”
To be sure, there was some scepticism at the time. Critics pointed out that signatories had so far aligned just 35% of their total assets with net zero targets. Becky Jarvis, a strategist at UK-based energy transition campaign group Sunrise Project, described their climate commitments as “a mile wide and an inch deep”, saying promises to tackle climate change could not be meaningful as long as financial institutions continued to have a major interest in expansion of fossil fuel production.
Empty promises?
And the optimism surrounding COP26 and the apparent readiness of the financial industry to harness its resources to advance net zero ambitions quickly faded amid a resurgence of inflation and the raising of interest rates to levels not seen for some two decades, as well as the fallout from Russia’s invasion of Ukraine in February 2022 — especially on energy markets, where fossil fuel prices, and their appeal to investors, soared.
Within less than a year of the Glasgow conference, two pension funds, Australia’s Cbus Super and Austria’s Bundespensionskasse, announced their departure from a sub-group, the Net Zero Asset Owner Alliance, blaming the resources needed to comply with reporting and tracking requirements. Dissatisfaction was expressed by other institutions not only over the administrative constraints but as well over the potential impact on profitability and shareholder returns and, increasingly, legal threats from political opponents of constraints on fossil fuels and sceptics about climate change.
In hindsight, Glasgow in late 2021 was not a springboard for net zero but, rather, a high-water mark. Members of the various net zero sector alliances, along with organisations such as institutional investor group Climate Action 100+, were already complaining about more stringent climate-focused lending and investment guidelines prior to the election of Donald Trump as president of the United States on November 6, 2024, who turned net zero pledges into existential threats.
Under his first administration, from 2017 to 2021, Trump had withdrawn the US from the Paris Agreement on climate change and periodically described climate change as a left-of-centre hoax. But initiatives – and companies – aiming to develop clean energy businesses and decarbonise the economy continued to thrive. Investment in green power generation projects boomed and companies pursued plans to curb their carbon emissions.
Assault on ‘woke ideology’
But that was then. This time it’s different. The net zero ambition has been targeted by the second Trump administration as part of its generalised assault on supposed ‘woke’ ideology. It represents a quantum shift from the state-level harassment by Republican officials of financial institutions with sustainable investment and lending policies – most notably the world’s largest asset manager, BlackRock, even though climate activists complain that it has been backing away from support for sustainability initiatives since 2022.
Membership in the Glasgow Financial Alliance for Net Zero has been explicitly targeted by US opponents of climate action as evidence, variously, of wilfully starving the fossil fuel industry of funding, sacrificing the interests of investors and shareholders to ideological goals, and collusion between financial institutions in breach of antitrust rules.
It was no great surprise, then, that in January 2025, just ahead of Trump’s inauguration as president, BlackRock withdrew from the Net Zero Asset Managers initiative, part of Carney’s Glasgow coalition. Another leading US fund group, Vanguard, which has also experienced legal and administrative harassment by Republican state officials over sustainable investment issues, already had left the organisation in December 2022.
In response, the organisation — which has 325-plus signatories that between them manage more than $57.5trn in assets — is suspending its activities while it conducts a fundamental strategy review. It already has interrupted its tracking of members’ activities and reporting on their progress towards net zero greenhouse gas emissions and, at least temporarily, removed the names of signatories and case studies from its website.
The impact of the political change has been even greater for the Net-Zero Banking Alliance. Since November, the departures have included the six largest US institutions, Goldman Sachs, Wells Fargo, Citigroup, Bank of America, Morgan Stanley and JPMorgan Chase. Six of Canada’s largest groups – Royal Bank of Canada, TD Bank, National Bank of Canada, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Bank of Montreal – have followed, along with Australia’s Macquarie and most recently Japan’s Nomura Holdings and Sumitomo Mitsui Financial Group. UBS says it is considering leaving the alliance, while the UK’s Barclays remains a member of the organisation but has instructed employees in the US not to speak about it unless prompted.
Acknowledging reality
The Net-Zero Banking Alliance, which previously required members to set emission reduction goals aligned with the Paris Agreement target to limit global warming to 1.5ºC above pre-industrial levels, is now asking participants whether emission goals should be aligned with warming of up to 2ºC instead. To some extent, that’s simply acknowledging reality after the average global temperature (not the 10-year average against which climate goals are measured) rose in 2024 to an unprecedented high of between 1.46ºC and 1.6ºC.
Meanwhile, the US Federal Reserve and Federal Deposit Insurance Corporation have announced they will leave the Network for Greening the Financial System after Republican members of Congress asked the Government Accountability Office to evaluate their membership. The body was established by central banks and financial regulators in 2017 to study climate-related risks to the banking system and encourage adoption of sustainable finance.
The wave of defections from the Glasgow Financial Alliance for Net Zero as well as from Climate Action 100+ – as many as 71 between June 2023 and October 2024 – would matter less if, as many of the withdrawing institutions have announced, they intend to continue pursuing efforts to curb climate change while avoiding potential legal jeopardy from accusations of anti-competitive collusion – for example, supposedly conspiring to secure the election of three climate activists to ExxonMobil’s board of directors in 2021.
However, the omens are not good. In February Europe’s biggest bank, HSBC, annouced it was abandoning its target of achieving net zero carbon emissions across its own business activities by 2030 because of the slow pace of change in the economy. It is now aiming to reach net zero 20 years later than previously planned, by 2050, and has lowered its expectation for emission reductions in its operations, business travel and supply chains this decade to 40%.
Abandoned emission financing goals
Wells Fargo says it is dropping its goal of achieving net zero emissions across its financing portfolio by 2050. It attributes its decision to factors outside the bank’s control such as public policy, consumer behaviour and technological changes that would help clients adopt more sustainable business practices. “Many of the conditions necessary to facilitate our clients’ transitions have not occurred,” the bank claims. Wells Fargo is also abandoning its sector-specific interim financed emissions targets for 2030, although it plans to maintain its 2030 operational sustainability goals and 2050 net zero target for its own emissions.
UBS blames its acquisition of domestic rival Credit Suisse for pushing back a target to cut its own greenhouse emissions to net zero by a decade, from 2025 to 2035, according to its latest sustainability report. UBS says the delay reflected its enlarged corporate real estate portfolio resulting from the emergency takeover of foundering Credit Suisse in March 2023. The report also reveals that its target for cutting emissions from mortgage lending to Swiss residential and commercial real estate is now based on a global scenario of long-term average temperatures rising by up to 2C from pre-industrial levels.
Other leading US business groups, but also non-profit organisations, are also lowering their heads below the parapet on sustainability. References to climate change on companies’ websites have been deleted or rewritten over the past year. Having previously publicly emphasised its climate action, Walmart has removed a section saying it was “deeply committed to addressing climate change”. Kraft Heinz revised its Net Zero and Science Based Targets web page in January, removing a reference to a target to cut emissions by 50% by 2030 and saying it is re-evaluating its net zero targets after encountering internal and external challenges.
Banks’ scaling back the extent or the timing of their climate targets does not necessarily mean they intend to increase financing of fossil fuel sectors, although the risk remains that the US legal system represents a tool to pressure them to do so. HSBC says its revised targets entail what it described as “a more measured approach” to oil and gas lending, but that does not necessarily imply a change in its financing policies for specific industries.
Oil and gas groups double down
However, energy companies are indicating that in response to continuing high prices for fossil fuel products, and the Trump administration’s philosophy of “Drill, baby, drill!”, they are dropping previous pledges to switch focus to sustainable sources and doubling down on oil and gas production.
Under pressure from an activist shareholder, hedge fund firm Elliott Management, BP will increase investment in oil and gas to $10bn a year as part of a reset to boost shareholder returns and increase oil output to between 2.3 million and 2.5 million barrels a day by the end of the decade.
BP’s previous investment plan five years ago envisaged shrinking oil and gas production to around 1.5 million barrels a day and reaching net zero emissions by 2050. Now it plans to launch 10 new major gas and oil projects by the end of 2027 and eight to 10 more by 2030, and the group is seeking the capacity to increase output further in the five years to 2035.
Norway-based Equinor, an early convert to the energy transition, has announced a 50% reduction in its investment in development of renewable energy and low carbon solutions between 2024 and 2027, and dropped its goal to allocate 50% of gross capital expenditure to sustainable businesses by 2030, saying it needs to adapt to market conditions and improve value creation for shareholders. It has also lowered its net carbon intensity targets for 2030 and 2035.
Last year, Shell revised its energy transition strategy, walking back its 2030 carbon emission reduction target and a planned further reduction its carbon footprint by 2035, citing uncertainty about the pace of change in many countries and the broader energy transition. At its 2024 annual general meeting, shareholders rejected a resolution put forward by activist group Follow This, which called on Shell to align its scope 3 emission reductions targets – basically, emissions from customers’ use of the group’s oil and gas products – with the goals of the Paris Agreement.
These developments are the backdrop to the Trump administration’s broad agenda of rolling back sustainability-friendly policies introduced by his predecessor, Joe Biden, particularly under the 2022 Inflation Reduction Act, and punishing companies that have been standard-bearers for sustainability-focused practice, especially relating to climate change and environmental degradation, although also embracing diversity, equity and inclusion.
Rolling back Biden’s sustainability agenda
Among a flurry of executive orders signed on the first day of his presidency, Trump withdrew the US for the second time from the 2016 Paris Agreement to curb climate change, which the country had rejoined under Biden in 2021, declared a national energy emergency aimed at filling up strategic oil reserves, and froze various Biden administration measures designed to boost green jobs and investment and regulate the fossil fuel industry.
The president ordered federal agencies to halt the disbursement of funds authorised by the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, and said the US would stop issuing leases to wind farms and scale back support for the purchase of electric vehicles. New leadership at the Environmental Protection Agency has announced plans to repeal or weaken more than two dozen regulations governing air and water quality standards, encourage a switch to electric vehicles and curb greenhouse gas emissions.
A small but particularly egregious example is the cancellation of funding for a nationwide tree-planting programme aimed at making neighborhoods cooler, healthier and more resilient to climate change, which was to distribute $75m in grant funding to around 100 different cities, non-profit organisations and native American tribes to plant shade trees in neighborhoods that need them the most. The U.S. Forest Service, part of the Department of Agriculture, says it is complying with Trump’s executive orders, and that the programme “no longer aligns with agency priorities regarding diversity, equity and inclusion”.
Among the most potentially damaging steps by the administration is the war it is waging directly on climate science, including extensive lay-offs and budget cuts at organisations such as the National Oceanic and Atmospheric Administration, the freezing of research programmes and bans on travelling to international conferences. Some academics fear the effectiveness of the next report in 2029 of the UN’s IPCC could be in jeopardy without the participation of US scientists, not least after the administration barred government officials from attending a preparatory meeting in Hangzhou, China.
EU’s wavering commitment
The abrupt policy about-turn, which has seen the US shift from seeking to rein in global warming to an apparent desire to actively encourage it, has delivered a seismic shock to other countries that remain committed to addressing the challenge of global warming and reducing carbon emissions in energy generation and other economic sectors. Still, it would be wrong to conclude that the net zero target was on track before Trump’s election.
Many countries that continue to express their commitment to decarbonisation are conflicted by the importance of their fossil fuel and resources industry, such as Australia and Canada. In Europe, opposition parties have campaigned against the cost of the climate transition, notably in Germany targeting a campaign to encourage homeowners to replace gas boilers with heat pumps – a persuasive argument at a time of rising energy prices, lacklustre economic growth and inflation at its highest level for a generation.
The European Union’s commitment to sustainability has been interpreted as wavering amid the European Commission’s new focus on competitiveness and economic growth (an ambition shared with the Labour government elected in the UK last July). In recent weeks, the European Green Deal strategy launched in 2019 has been subject to qualifications such as easing environmental reporting and compliance rules for small businesses as well as delaying penalties for car manufacturers that fail to meet quotas for low-emission vehicles.
The EU’s world-leading sustainability reporting legislation is also being reconsidered by policymakers. The European Commission’s Competitiveness Compass, setting priorities for the next five years to restore the union’s ability to compete in global markets, prioritises regulatory simplification, including reducing companies’ reporting obligations under the Corporate Sustainability Reporting Directive, Corporate Sustainability Due Diligence Directive and Taxonomy Regulation.
Carbon border tax exemption
The Commission has also proposed exempting the vast majority of European companies to be covered by the EU’s carbon border adjustment mechanism, which from next year is intended to impose a tax on the carbon emissions embedded in goods such as imported steel, aluminium and cement, as well as electricity and hydrogen. It proposes to sharply reduce the number of importers covered from the original 200,000 by applying the levy only to companies importing goods with a mass-based threshold of 50 tonnes a year, exempting most smaller businesses and individuals, although it would still cover more than 99% of the emissions targeted.
The Commission says it is responding to pressure on companies in international markets where they face competitors not constrained by the same rules. But slowing progress toward decarbonisation is also a factor. Electric car sales declined in some of the biggest European markets including Germany and France last year, with new registrations of new battery-powered vehicles falling by 1.3% from 2023. Manufacturers complain that cash-strapped governments are not doing enough to encourage the creation of a fast-charging infrastructure needed to persuade motorists to make the switch.
Meanwhile, the rebound in flying since the Covid-19 pandemic has confounded analysts who predicted a long-term decline in air traffic – an industry that currently accounts for just 2.5% of worldwide carbon emissions but whose contribution to global warming is growing much faster than other forms of transport and is harder to decarbonise than most. Aviation’s net zero strategy is essentially built on the pious hope that by 2050, sustainable aviation fuel will have largely replaced kerosine, even though it is currently only available in vanishingly small quantities.
Even solar energy, a flagship success of decarbonisation strategies, is hamstrung by infrastructure constraints in many countries; in the UK, some businesses attempting to connect photovoltaic arrays to the national electricity grid have been quoted waiting times as long as 15 years. The same applies to wind energy, even when developers of onshore wind farms can overcome local resistance to massive turbines regarded as eyesores by locals and a barrier to tourism and agriculture.
Accelerating climate damage
Meanwhile, the climate won’t wait. Last year was the hottest year on record, the 10 hottest years were all in the past decade and carbon dioxide levels in the atmosphere are at an 800,000-year high, according to the World Meteorological Organization’s latest annual State of the Climate report.
It cites oceans as well at the atmosphere setting the highest temperatures on record, an ongoing rise in seas levels and the accelerating melting of ice sheets and glaciers around the world, but especially in the Arctic Ocean, Greenland and Antarctica. The authors say global warming contributed to at least 151 unprecedented extreme weather events in 2024, causing precipitating damage to agriculture and eroding food security as well as economic losses.
UN secretary-general António Guterres insists that the Paris Agreement ambition of limiting warming to 1.5ºC above levels in the pre-industrial era is still possible if leaders worldwide “step up to make it happen — seizing the benefits of cheap, clean renewables for their people and economies.” But the evidence is against it.
Even now, there seems little doubt that the world will ultimately reach net zero greenhouse gas emissions. However, bar a sudden moonshot-style breakthrough in technology such as massive-scale carbon capture and storage, or the harnessing of energy from nuclear fusion, it seems unlikely to happen in time to prevent the impact of 2ºC or more of warming in disrupting the human environment and civilisation.
As the saying goes, good luck with that.
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