How Wall Street Turned Its Back on Climate Change

In January 2020, Larry Fink, CEO of BlackRock, the world’s largest asset manager, surprised the business world by declaring that he intended to use the trillions of dollars managed by his company to tackle global warming.

“Every government, business and shareholder needs to address climate change,” Fink wrote, advocating “a fundamental reshaping of finance.”

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A few days later, Fink arrived in Davos, Switzerland, for the World Economic Forum’s annual meeting, wearing a scarf with a “warming stripes” design, a pattern that depicts 150 years of rising global temperatures.

Fink’s impassioned call to tackle climate change was the informal beginning of a movement. Soon, virtually all major financial institutions began promising to reduce emissions, joining ambitious alliances created to phase out fossil fuels and promising to support clean energy.

Environmental, social and governance factors, known as ESG, have become a defining characteristic of Wall Street investing.

But six years later, many of these Wall Street institutions have backed off or abandoned their commitments.

Alliances — such as the Net Zero Banking Alliance and the Net Zero Asset Managers initiative — that aimed to shift investment toward clean energy and away from fossil fuels have all but disintegrated. Investors withdrew tens of billions of dollars each quarter from ESG funds.

While U.S. investment in clean energy has soared in recent years — reaching $279 billion last year — many large companies have become silent on climate change.

In earnings calls, mentions of words like “climate” and “sustainability” plummeted 75% in the last year, according to a Bloomberg analysis.

And, with President Donald Trump back in office and using the presidency to promote fossil fuels and attack the clean energy industry, Wall Street’s retreat from climate action has coincided with American banks doubling down on coal, oil and gas projects.

These dynamics will become fully visible when Fink, now co-chair of the World Economic Forum, welcomes Trump to Davos, where climate issues have taken a backseat to artificial intelligence and geopolitics.

The story of how Wall Street turned its back on climate change — of how a bold attempt to transform finance collapsed — began almost immediately after Fink and his allies announced their ambitions to use capitalism as a tool to save the planet.

Republican politicians joined forces with conservative activists, including groups funded by the fossil fuel industry, to engineer a broad response to what they saw as an attempt by big American corporations to promote liberal policies.

“These institutions signed on without having any idea what they were signing up for,” said Paddy McCully, an analyst at Reclaim Finance, a nonprofit that pressures Wall Street to address climate change. “They were following the herd and wanted to look good, but they never had any inclination to change their business model.”

The rise of ESG

It was money, more than anything else, that led Wall Street to care about climate change in the first place.

In 2019, many of BlackRock’s biggest clients, including large pension funds and sovereign wealth funds in Japan and Europe, began asking for funds more focused on environmental issues.

If BlackRock created products that promised to benefit the planet, pension funds and sovereign wealth funds said they would trust the company with even more money.

Fink complied with the request. BlackRock began developing new environmental funds and was soon in Davos, wearing the climate scarf.

“Larry decided to be a leader of the wave,” said Mindy Lubber, CEO of Ceres, a nonprofit that works with businesses to address climate change. “It worked, until it didn’t.”

Other Wall Street titans quickly followed BlackRock’s lead. All major American banks said they would no longer finance drilling in the Arctic National Wildlife Refuge.

JPMorgan said it was “adopting a financing commitment aligned with the goals of the Paris Agreement,” the 2015 agreement reached by most of the world’s countries to try to keep global warming below 1.5 degrees Celsius.

It was a fashionable commitment, and the movement soon encompassed everything from investing in environmentally responsible stock portfolios to lending to clean energy companies and reducing corporate carbon emissions.

But in practice, achieving the goals set out in the Paris Agreement would have meant promoting rapid global change, moving away from fossil fuels and moving to clean energy sources like wind and solar.

For a bank like JPMorgan, which often ranks as the largest U.S. financier of fossil fuel projects, that would have meant quickly scaling back a profitable line of business. JPMorgan did not respond to a request for comment.

Sensing the momentum, Fink was even more ambitious in his 2021 annual investor letter. In it, he promised to disclose the climate impact of all BlackRock funds, create customized sustainability products, develop new ways to measure climate risk, and use the voting power of the company’s holdings to pressure companies to address climate change.

In the following months, JPMorgan, Citigroup and Bank of America collectively pledged to mobilize $5 trillion in sustainable finance by 2030 through loans and investments.

Ambitions continued to grow at the UN’s annual climate summit in 2021. Known as COP26, the event in Glasgow, Scotland, was the first of its kind since the pandemic, and its organizers wanted something concrete to show.

Mark Carney, who had just stepped down as president of the Bank of England and is now Prime Minister of Canada, was asked to coordinate a new UN-backed group that would encourage the private sector to reduce emissions.

The result was the Glasgow Financial Alliance for Net Zero, or GFANZ, which said it would use the collective strength of its members — about $130 trillion in assets — to try to curb global warming.

More than 450 financial groups, including BlackRock, Bank of America and Citi, have joined. In addition to the main umbrella group, GFANZ now encompasses several sector-specific associations, such as the Net Zero Banking Alliance, the Net Zero Asset Managers initiative and the Net-Zero Asset Owners Alliance.

These alliances were a way for financial companies to signal support for the highly ambitious goal of eliminating new planet-warming emissions by 2050. And joining was easy, requiring little more than a statement of good intentions. With no expectations that banks or investors would need to change their business models, companies joined in droves.

By convincing financial executives to join the groups, Carney and his allies emphasized the opportunity to generate profits.

“Mark Carney sold this as a money-making opportunity,” said Evan Guy, a former GFANZ adviser. “There were trillions to be made.” Carney did not respond to a request for comment.

Fink had delivered what some customers asked for and, alongside Carney, had sparked a global movement.

It all added up to a banner year for BlackRock, which attracted nearly $25 billion in new assets to its ESG funds in 2021.

Reaction

On the same day that executives in Glasgow were promoting their plans to use Wall Street as a force for good, a group of Republican state treasurers met in Orlando, Florida, to plan how to stop them.

The treasurers, part of a group called the State Financial Officers Foundation, discussed ways to prevent their states’ assets from being used to support environmental causes.

Within months, Republican state treasurers withdrew more than $1 billion from BlackRock. Conservative politicians and media commentators began to pressure Wall Street to move away from the climate cause.

Supporting these efforts were right-aligned research organizations such as the Heritage Foundation and the Heartland Institute, major conservative funders and operators including the Koch brothers and Leonard Leo, and fossil fuel industry trade groups such as the American Petroleum Institute.

As conservative opposition grew, financial companies faced unexpected legal risks.

In 2022, a UN-backed group called Race to Zero, which partnered with GFANZ, updated its expectations for what participating companies should actually do. Among the changes was new language that pressured financial companies to stop doing business with coal companies.

This raised alarm bells on Wall Street, and conservatives seized the opportunity. Just a month after the update, a group of Republican activists met at a meeting of the American Legislative Exchange Council in Atlanta and discussed how they could target companies participating in GFANZ with antitrust actions.

Critics also accused companies that adopted ESG strategies of neglecting their duty to maximize profits for shareholders.

Responding to concerns from financial companies, GFANZ severed its ties with Race to Zero at the end of 2022. But the damage was already done.

Republican legislatures across the country have introduced more than 100 bills to punish financial companies that support ESG practices. Republican state treasurers began pulling money from BlackRock.

In late 2022, conservative lawmakers in Texas opened investigations against BlackRock and other Wall Street firms for their climate commitments and ESG practices, and Republicans in Congress subpoenaed GFANZ, BlackRock and State Street.

Collapse

Following Trump’s reelection in November 2024, virtually all major American banks and financial institutions withdrew from the Net Zero Banking Alliance, leading the group to dissolve.

Then, large banks and financial institutions abandoned the Net Zero Asset Managers initiative. Days later, the initiative reported that it was “suspending activities”. The group now says it will be relaunched later this year.

Bank of America, which had said it would stop financing coal and refrain from financing drilling in the Arctic, backed away from those commitments. The company declined to comment.

And BlackRock has drastically reduced its support for social and environmental shareholder proposals.

In a statement, Chris Berger, a spokesman for BlackRock, said the company had built the industry’s largest platform for investing in sustainable business practices and the energy transition, with more than $1 trillion in assets under management.

But in Fink’s most recent letter to investors, there was no mention of climate change. Instead, he emphasized the need for “energy pragmatism.”

In the words of a former BlackRock executive who requested anonymity to speak freely: “It was a bunch of empty promises made by a bunch of Wall Street people who abandoned their commitments when it stopped being convenient. We went up the hill and then back down.”

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