The report titled “The State of Net-Zero Finance” provides a detailed analysis of the transformative developments within the financial sector as it navigates the transition to net zero. It observes that the operating environment for financial institutions, particularly in the United States, has become increasingly complex due to intensified legal challenges regarding Environmental, Social, and Governance (ESG) factors, shifting political landscapes, and high-profile departures from voluntary climate alliances.

Legal and political pressure

A pivotal development occurred when a U.S. District Court in Texas ruled that American Airlines breached its fiduciary duty of loyalty by selecting BlackRock as an investment manager for its $26 billion retirement plan. This decision was based on BlackRock’s association with ESG goals, even though the plan had no exposure to BlackRock’s ESG investment offerings. This uncertainty is further compounded by antitrust lawsuits filed by Texas and ten other states against major firms such as BlackRock, State Street, and Vanguard. Furthermore, the House Judiciary Committee has launched investigations into Climate Action 100+ to determine if collaborative engagement violates antitrust laws. These overlapping challenges have created significant uncertainty regarding how institutions can incorporate climate considerations while meeting fiduciary obligations and avoiding regulatory scrutiny.

Shifting alliances, diverging strategies

The landscape of voluntary cooperation is undergoing a fundamental restructuring, with a stark divergence emerging between different subsectors and regions. In the banking sector, the Net Zero Banking Alliance (NZBA) has seen an exodus of leading U.S. banks, including JPMorgan Chase, Goldman Sachs, Wells Fargo, Citigroup, Bank of America, and Morgan Stanley. This trend was followed by major Canadian institutions such as TD Bank and Scotiabank. Conversely, 134 banks remain signatories to the NZBA, with major European banks like HSBC, BNP Paribas, and Barclays maintaining their commitments. Some departing U.S. banks have publicly reaffirmed individual climate targets, suggesting a pivot toward more individualised climate risk management rather than collective action.

Asset management

The asset management sector has faced similar instability. The Net Zero Asset Managers Initiative (NZAM) experienced significant departures, including Vanguard and Franklin Templeton, culminating in January 2025 when BlackRock, the world’s largest asset manager, exited. This prompted NZAM to suspend all activities and remove signatory commitments from its website for a comprehensive review. Reactions amongst remaining members are mixed; while Lombard Odier views this as an opportunity to address political challenges and strengthen governance, others, like Allianz Global Investors, fear the suspension could slow the momentum of climate action. State Street Global Advisors has emphasised the need to balance collaborative efforts with evolving regulatory requirements and antitrust challenges.

The insurance sector

The insurance industry was the first to experience the unraveling of voluntary initiatives, with the Net Zero Insurance Alliance (NZIA) effectively dismantled in April 2024 amidst political pressure. This retreat is particularly significant given insurers’ unique role in assessing and pricing climate risks. The dissolution of coordinated industry responses has contributed to a growing crisis in insurance markets in regions like California and Florida. Private insurers are pulling back coverage, forcing state-backed programmes such as California’s FAIR Plan and Florida’s Citizens Property Insurance Corporation to shift from being insurers of last resort to becoming primary providers of coverage.

Asset owners

In contrast to other subsectors, large asset owners have notably strengthened their climate commitments. The Net Zero Asset Owner Alliance (NZAOA) recently welcomed the New York City Employees’ Retirement System (NYCERS) and its $77 billion in assets. Additionally, the CEO of the California Public Employees’ Retirement System (CalPERS) reinforced the $444 billion fund’s commitment to addressing climate risks regardless of political opposition. As “universal owners” with multi-decade investment horizons, these entities are better positioned to argue that addressing systemic climate risks falls directly within their fiduciary duty.

The road ahead

The report concludes that the path forward involves a fundamental shift in how climate integration is approached. In January 2025, the Glasgow Financial Alliance for Net Zero (GFANZ) restructured its criteria to prioritise capital mobilisation over prescriptive decarbonisation pathways, allowing institutions to participate regardless of whether they have made specific net-zero commitments. While U.S. federal policy remains uncertain, states like California are moving forward with mandatory disclosure requirements. The finance sector must now lead by demonstrating that effective climate-related risk and opportunity management is essential for long-term value creation.