Canada’s Biggest Banks Join Wall Street-Led Exodus From Climate Alliance

Royal Bank of Canada was the latest in leaving the banking industry’s largest climate-finance alliance, insisting the decision would not impact its net-zero pledge.

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Canada’s six biggest banks have announced their withdrawal from the industry’s largest climate alliance, following a recent Wall Street firms exodus.

Royal Bank of Canada (RBC) became the latest to leave the Net-Zero Banking Alliance, after Toronto-Dominion, Bank of Nova Scotia, Bank of Montreal, National Bank of Canada, and Canadian Imperial Bank of Commerce all announced their departure last month.

The UN-sponsored initiative was set up in 2021 by former Bank of Canada Governor Mark Carney to encourage financial institutions to limit the environmental footprint of their operations and push toward achieving net-zero emissions by 2050.

The exodus of Canadian banks comes on the heels of a trend where several major Wall Street banks are stepping back from climate initiatives.

The six biggest banks in the world’s largest economy – Goldman Sachs, Wells Fargo, Citi Bank, Bank of America, Morgan Stanley, and JPMorgan – recently quit the alliance. While not directly citing it as an influencing factor, the banks have for some two years been the focus of a Republican-led campaign against environment, social and governance investing.

All banks insisted their decision would not impact their decarbonization pledges, with RBC Chief Executive Officer Dave McKay reassuring that pulling out of the alliance “doesn’t lead to a non-commitment to net zero or climate change.”

However, analysts say the moves send a clear signal to the market that climate change has become even less of a priority for Wall Street.

Exodus

Banks are not the only ones shying away from sustainability commitments.

BlackRock, the world’s largest investment management corporation, last month withdrew from the Net-Zero Asset Managers (NZAM) initiative, a key international group of asset managers committed to reaching net-zero emissions. The New York-based firm, which manages assets worth some $11.5 trillion, said the decision to leave was prompted by pressure from public officials and Republican-led legal inquiries.

Following Blackrock’s departure, the alliance – a voluntary initiative – said it was “disappointed” but respected “any individual decisions signatories take.” It later announced it was suspending activities to “track signatory implementation and reporting” to undergo an internal review, citing “recent developments in the U.S. and different regulatory and client expectations in investors’ respective jurisdictions.”

“As a voluntary initiative, NZAM has successfully supported investors globally as they have sought to navigate their own individual paths in the energy transition in line with their fiduciary duties and clients’ long-term financial objectives. NZAM looks forward to continuing to play this constructive role with investors around the world,” it said in a statement.

The alliance launched in December 2020 to support the asset management industry to commit to a goal of net zero emissions in order to mitigate financial risk and to maximize long-term value of assets. The group counted over 325 signatories managing more than $57.5 trillion of assets, its website stated prior to Blackrock’s departure.