Morgan Stanley & Co. LLC has terminated its membership in a major climate-focused banking group, aligning with a broader retreat by Wall Street firms from a global alliance designed to accelerate the reduction of greenhouse gas emissions. The move positions Morgan Stanley among a growing list of big financial institutions that have stepped back from the Mark Carney-led climate coalition, signaling a reshaping of industry-led net-zero initiatives in a contested policy environment. The departures come as banks reassess how best to balance decarbonization commitments with other strategic, regulatory, and political considerations amid a shifting U.S. political backdrop.
Background: NZBA, GFANZ, and the evolving climate-finance landscape
Formation and purpose of GFANZ
The Glasgow Financial Alliance for Net Zero (GFANZ) was established more than three-and-a-half years ago in the run-up to the COP26 United Nations climate conference in Scotland. Its founders set two primary aims: to raise the number of financial institutions committing to net zero and to facilitate cross-sector industry dialogue about the practical challenges of transitioning economies to a low-carbon future. GFANZ sought to create a coordinated framework that would help the financial sector channel capital toward technologies, projects, and policies compatible with a net-zero trajectory.
The role of NZBA within the climate-finance ecosystem
Within this broader ecosystem, the Net-Zero Banking Alliance (NZBA) functioned as a major subgroup focused on the banking industry’s role in financing the transition. It served as a forum for member banks to align on net-zero financing commitments, share progress, and coordinate approaches to decarbonization through lending and investment practices. The NZBA’s membership included some of the world’s largest banks, and its activities were closely watched by regulators, investors, and climate policy advocates who track how financial institutions translate pledges into concrete actions.
The 2024 pivot by GFANZ and the broader trend of exits
By the end of 2024, GFANZ announced a strategic adjustment in how it operates, signaling a shift from blanket membership models to a more flexible, guidance-oriented approach. The organization stated that going forward, financial firms would be free to draw on GFANZ for guidance and assistance without necessarily belonging to one of the sector-specific alliances. This reframing effectively decoupled the strict membership ties of many climate groups, creating space for exits and reconfigurations across the network of climate-aligned groups in the finance industry. The defections from NZBA—and from related climate groups within GFANZ’s umbrella—followed prior mass movements in other parts of the financial sector, underscoring a broader reevaluation of how best to pursue net-zero objectives within a changing policy and business environment.
The broader industry context and the shift in alliances
The departures from NZBA come amid a broader pattern in which climate-focused industry groups have seen members leave, even as many institutions reaffirm their commitments to reducing financed emissions. The 2023 exodus by a coalition of insurers and the 2022 parting of asset-management groups from a Vanguard-affiliated alliance illustrate a recurring theme: firms often recalibrate their alliances as antitrust scrutiny, litigation risk, and regulatory expectations evolve, and as political headwinds influence public and shareholder perceptions of net-zero strategies. In this context, the transition away from NZBA toward more flexible structures within GFANZ reflects a strategic recalibration rather than a wholesale abandonment of climate commitments, with many banks indicating they still intend to pursue internal decarbonization targets and to assist clients in reducing their carbon footprints.
Morgan Stanley’s departure: Immediate statements and implications
The decision and its immediate framing
Morgan Stanley announced it was leaving the Net-Zero Banking Alliance (NZBA) on a Thursday, aligning with a wave of other prominent banks that have recently exited the climate-focused group. The bank indicated that it would continue to pursue its own net-zero objectives and to support clients in reducing their emissions, even as it shifted its formal alliance status within NZBA. This separation from NZBA represents a strategic realignment rather than a repudiation of climate commitments, given Morgan Stanley’s ongoing emphasis on environmental finance and decarbonization across its client base.
Morgan Stanley’s public stance on progress and targets
In communications to stakeholders, Morgan Stanley stated: “We will continue to report on our progress as we work towards our 2030 interim financed-emissions targets.” This assertion emphasizes ongoing disclosure and accountability for the bank’s financed-emissions reductions, a hallmark of large financial institutions’ public commitments to net-zero pathways. The bank’s message underscores a continuity of ambition even as it adjusts its formal alignment with NZBA, signaling that transparency and measurable decarbonization remain central to its strategy.
Reactions from NZBA and the broader industry
A spokesman for NZBA—Daniel Storey—declined to comment publicly on the departure, reflecting a cautious approach to media inquiries during a period of structural change within GFANZ and its affiliated groups. The broader industry response to such exits has been varied, with policymakers, investors, and climate advocates often interpreting these moves through the lens of how they affect the pace and scale of decarbonization financing. While some observers may view these departures as signs of strategic retrenchment, others see them as part of a natural evolution toward more flexible, outcome-oriented collaborations that still aim to advance climate finance goals.
Morgan Stanley’s 2024 adjustments to climate targets
The departure comes against the backdrop of Morgan Stanley’s prior adjustments to some of its green targets in 2024. Notably, the bank revised its plastics target, with a September 2024 report noting the omission of a previously stated pledge to prevent, remove, or reduce 50 million metric tonnes of plastic waste from the environment by 2030. These adjustments highlight the nuanced and sometimes recalibrated nature of large banks’ environmental commitments, reflecting ongoing assessments of feasibility, impact, and prioritization within a rapidly evolving policy and market environment. Morgan Stanley has also warned about potential unintended consequences that could arise if financing is withdrawn too quickly from high-carbon clients that are actively planning to decarbonize, underscoring the complexity of balancing rapid decarbonization with prudent risk management and ongoing client support.
Political and policy backdrop: Pressures, lawsuits, and sector responses
The U.S. political climate and net-zero scrutiny
The defections from NZBA and related groups occur within a tense political backdrop in the United States. The country’s largest financial firms have found themselves targets of Republican campaigns that have characterized net-zero groups as climate cartels. This framing has intensified scrutiny of net-zero commitments and prompted questions about the practicality and fairness of climate-aligned financing strategies in the current regulatory and political landscape. The intersection of policy risk and corporate strategy has become a central topic for banks as they navigate stakeholder expectations, shareholder concerns, and evolving regulatory guidance.
Antitrust and litigation context: Texas’s actions against major asset managers
Notably, Texas led a move to sue BlackRock Inc., Vanguard Group Inc., and State Street Corp. for allegedly breaching antitrust laws by using climate-friendly investment strategies to influence the supply of coal. BlackRock, in response, has argued that the allegation—that it invests to harm coal companies—is baseless. This high-profile litigation underscores the risk landscape surrounding climate-focused investment strategies and highlights how public debates over net-zero strategies can intersect with substantive legal challenges. The Texas lawsuit illustrates the broader risk environment in which big asset managers and banks operate as they pursue carbon-reduction goals.
Other banks that have left or signaled exits from NZBA
In addition to Morgan Stanley, Goldman Sachs Group Inc. and Wells Fargo & Co. have been cited as having left NZBA in recent times. While each institution emphasizes its ongoing commitment to its own net-zero goals and to helping clients reduce their carbon footprints, these exits reflect a broader reconfiguration of how major financial firms participate in formal climate-initiative coalitions. The shared message from these institutions remains a pledge to continue progress toward decarbonization targets, even as they adjust their alliance memberships and governance structures.
GFANZ’s updated remit and long-term focus
GFANZ, in its latest statements, indicated that its role has evolved to focus on closing critical gaps—data, action, and investment—necessary to accelerate a transition that can mobilize significant capital toward energy-system modernization. The organization asserted that the financial system now has the building blocks required to finance the transition to net zero, while recognizing that achieving this transition requires concerted policy action, rapid technology development, and the mobilization of substantial capital. GFANZ’s emphasis on bridging the “investment gap” to unlock opportunities within a multi-trillion-dollar annual scale reflects a strategic pivot from alliance-building to actionable, market-driven progress.
Historical context: Exits from climate groups in finance
Past exits and the trajectory of climate-aligned groups
The pattern of exits from climate-aligned groups within finance is not new. In 2023, a coalition of insurers undertook a mass exodus amid litigation threats. In 2022, an equivalent group for asset managers parted ways with Vanguard Group, the world’s second-largest money manager, with other investment firms following suit. These historical moves illustrate how financial sector players have repeatedly re-evaluated their affiliations with climate coalitions as the legal, regulatory, and political environment shifts. They also underscore a broader dynamic: while formal membership in climate alliances can influence public perception and governance standards, many firms continue to pursue internal decarbonization agendas and to support clients in reducing emissions, even outside of formal alliances.
The Texas climate litigation and its broader implications
The Texas lawsuit against the three largest U.S. money managers drew attention to the legal consequences some institutions fear could accompany climate-related investment practices. The suit invoked antitrust concerns, arguing that the managers’ climate-oriented strategies might distort the energy markets by suppressing coal supply. The legal discourse surrounding such cases may influence corporate risk assessments, governance disclosures, and the design of future net-zero programs, even as banks maintain their commitments to long-term decarbonization objectives and client advisory roles.
Implications for financing the net-zero transition: Data gaps, investment, and policy needs
GFANZ’s strategic pivot toward closing the investment gap
GFANZ has articulated a clear objective: to accelerate progress by addressing data gaps, translating commitments into action, and mobilizing investment. The organization has underscored that unlocking more than US$5 trillion annually in opportunities will require advances in public policy, technology development, and improved data transparency. This framework reinforces the notion that climate-finance success depends not merely on pledges but on the capacity to translate those pledges into measurable financing that accelerates the deployment of low-carbon energy and infrastructure. The focus on closing gaps reflects a systems approach to funding the energy transition, recognizing that capital is required at scale to modernize energy systems and drive decarbonization across industries.
Implications for banks and their clients
For banks, the recalibration of alliances does not necessarily equate to reduced ambition. Instead, it signals a reconfiguration of governance and collaboration models that can still deliver on decarbonization goals through enhanced reporting, disciplined financing, and closer client engagement. Clients may experience a shift in how banks communicate progress, how financing decisions are structured, and how risks related to transition pathways are managed. As banks continue to report on interim financed-emissions targets and other climate-related metrics, stakeholders will be watching for consistency, transparency, and demonstrable progress toward decarbonization milestones.
The role of data, technology, and policy in accelerating decarbonization
The emphasis on data, action, and investment gaps highlights the critical role of technology and policy in enabling net-zero finance. Improved data quality and availability on financed emissions, along with standardized measurement methodologies, can enhance comparability and accountability across institutions. Simultaneously, policy developments—ranging from carbon pricing to subsidies for clean energy technologies—will influence the pace and direction of investment in decarbonization projects. The multidimensional approach suggested by GFANZ points to a coordinated effort that aligns corporate strategy with public policy and technological innovation to realize the net-zero agenda.
Morgan Stanley’s climate-strategy dynamics: Target revisions and strategic implications
The 2024 plastics target adjustment
Morgan Stanley’s 2024 adjustment to its plastics-related goal reflects the bank’s willingness to revisit and refine its environmental commitments as part of adaptive decarbonization planning. The removal of the explicit pledge to address a specified tonne target for plastic waste signals a recalibration in response to feasibility assessments, market conditions, or strategic priorities. This adjustment underscores the complexity of setting ambitious endpoints in environmental programs, particularly when the practical pathways to achieving such targets require sustained collaboration with clients and regulators, as well as careful risk management.
Unintended consequences of rapid retreat from high-carbon clients
The bank’s caution about potential unintended consequences of withdrawing financing too quickly from high-carbon clients that intend to decarbonize highlights a nuanced view of transition finance. It acknowledges that abrupt disruption could hinder decarbonization efforts by unsettling the financial viability of companies pursuing gradual, but meaningful, transition pathways. This perspective suggests a balancing act between accelerating decarbonization and preserving the capital flows necessary for clients to implement cleaner technologies, modernize operations, and meet ambitious climate goals over time.
Implications for investors and stakeholders
Investors, clients, and other stakeholders closely monitor such strategic shifts for signals about risk management, governance, and climate-related disclosure. Morgan Stanley’s trajectory—combining ongoing progress reporting with a formal exit from NZBA and adjustments to specific targets—may influence investor sentiment, particularly among those who prioritize transparent, verifiable decarbonization progress. It can also shape how clients perceive the bank’s support for their own transition plans, both in terms of financing terms and the level of technical and advisory assistance available to them as they navigate the path to net-zero.
Client and market implications: What changes on the ground?
Financing decisions and client engagement
As large banks recalibrate their climate-aligned affiliations, clients can expect continued emphasis on financed-emissions tracking, reporting, and targeted reductions. Banks may deploy more structured financing instruments, enhanced due diligence on transition plans, and closer collaboration with clients to identify feasible decarbonization opportunities. The shift in alliance status may influence the cadence and format of engagement, but the underlying objective—supporting clients in reducing emissions—remains central to strategic discussions.
Public perception, regulatory expectations, and governance
Public discourse around net-zero commitments continues to evolve, with stakeholders seeking rigorous governance, clear accountability, and credible, data-driven progress. Banks’ governance frameworks, disclosure practices, and engagement with regulators will be scrutinized as part of ongoing dialogue about the appropriate pace and scale of decarbonization in the financial sector. The current landscape suggests an emphasis on transparency and measurable outcomes, with institutions under pressure to demonstrate tangible progress toward stated emission-reduction targets and to align incentives with long-term climate objectives.
Strategic flexibility and resilience for financial institutions
The reconfiguration of climate alliances may offer banks greater strategic flexibility to tailor their climate programs to their specific risk profiles, client bases, and market conditions. This flexibility can enhance resilience by enabling institutions to adapt to shifting political and regulatory environments while preserving a clear commitment to decarbonization. For clients, this may translate into more bespoke transition plans, targeted financing for energy-efficiency upgrades, and support for market-ready low-carbon technologies, all backed by robust monitoring and reporting.
Historical patterns of climate-group exits: Insights and implications
Lessons from insurer and asset-manager exits
Historical exits by insurers in 2023 and by asset managers in 2022 provide context for the current wave of departures. These events illustrate that even as institutions leave formal alliance structures, many continue to pursue internal decarbonization goals and to maintain client-support initiatives aimed at reducing emissions. They also highlight how legal, regulatory, and public scrutiny can influence corporate strategies, compelling firms to reassess their participation in collective industry frameworks and to recalibrate governance and disclosure practices.
The balance between alliance participation and independent action
The recurring pattern of leaving climate coalitions but maintaining decarbonization commitments suggests a broader tension in the financial sector: the value of collective, industry-wide governance versus the autonomy to design and implement bespoke transition strategies. The balance appears to favor a hybrid approach in which firms retain internal targets, reporting capabilities, and client services while choosing governance arrangements that best align with their risk appetite, stakeholder expectations, and strategic priorities.
Conclusion
Morgan Stanley’s decision to exit the Net-Zero Banking Alliance marks another milestone in a broader rethinking of how major financial institutions engage with climate-focused coalitions. The move aligns with a wider set of departures from NZBA and reflects the ongoing evolution of GFANZ’s structure, which now emphasizes guidance and collaboration rather than formal membership. Despite the exit, Morgan Stanley has reaffirmed its commitment to reducing financed emissions and continuing to report progress toward its 2030 targets, while also adjusting specific environmental goals such as plastics-related ambitions. The U.S. political and legal environment—characterized by heightened scrutiny of net-zero initiatives and high-profile antitrust discussions—adds a layer of complexity to how banks coordinate climate strategies with investors, regulators, and clients. As GFANZ emphasizes closing the investment gap and accelerating the transition through data quality, policy progress, and technology development, the financial sector appears poised to pursue net-zero objectives through more flexible, outcome-driven approaches. Banks and clients alike will watch closely how these strategic shifts translate into measurable progress, governance transparency, and scalable financing that supports a robust and equitable transition to a low-carbon economy.
