Banks Under Pressure: Between Activism and Climate Retreat

Banks play a key role in capital allocation and are central to financing the green transition. In recent years, banks have made ambitious public commitments to reduce financed emissions, disclose their polluting investments and increase funding for sustainable activities. Notably, over 138 banks, representing more than 40% of global banking assets, have joined the Net Zero Banking Alliance (NZBA), one of the most stringent voluntary climate initiatives launched in 2021. These "net zero banks" have pledged to “align their lending and investment portfolios with net-zero emissions by 2050 and set intermediate targets for 2030 or sooner”. 

Despite these strong public commitments, recent studies (e.g. Bruno and Lombini, 2023; Giannetti et al., 2023; Marquez-Ibanez et al., 2024) report little significant evidence of divestment from high-carbon-emission firms, casting doubt on the effectiveness of such voluntary private-sector initiatives. Adding to these concerns, a recent and striking development saw major US banks, including Bank of America, Citigroup, Goldman Sachs and Wells Fargo, withdraw from the NZBA. This exodus from the coalition reflects mounting political pressure from Republican lawmakers and a broad retreat by companies from environmental initiatives ahead of a second Trump administration, as President-elect Donald Trump called climate change a hoax and is expected to roll back related regulations. It raises critical questions about the future and real-world impact of climate alliances. 

This shifting landscape makes the role of environmental non-governmental organizations (NGOs) – whose press campaigns have become increasingly influential over the past decade – more critical than ever. NGOs have worked to expose financial institutions' connections to fossil fuel companies, highlighting the gap between banks' public climate pledges and their ongoing funding of carbon-intensive industries. Their "name and shame" strategies often urge the public to switch banks, threatening to penalize financial players for failing to align with environmental goals.

In a recent study “Some Don’t Like It Hot: Bank Depositors and NGO Campaigns Against Brown Banks”, we examine the effects of these NGO campaigns on depositors’ behavior. Using data from Sigwatch, a consultancy tracking global NGO activism, we analyze all the campaigns targeting the seven largest banking groups in France, which account for some 95% of domestic household deposits, over the years 2011-2020. Based on the number and intensity of these campaigns, we construct an index of the “brown” reputation of the banks, reflecting the extent to which their sustained lending to fossil fuel firms was publicly criticized by NGOs. The analysis reveals that the banks perceived as brown experience relative declines in household sight deposits, suggesting that public awareness spurred by environmental campaigns translates into action. Importantly, this backlash from individual bank customers mostly materialized following the implementation of France’s 2017 "Bank Mobility Regulation", a legal provision which simplified the process of switching banks. After this regulatory change, deposit outflows from brown banks accelerated, suggesting that reduced transaction costs amplify consumer reactions to environmental concerns. We also highlight geographic and socioeconomic disparities in consumer behavior. In wealthier counties, areas with higher educational attainment or regions with a larger proportion of green voters, depositors began moving funds away from brown banks even before the regulatory change. 

What do these findings imply in light of banks withdrawing from climate coalitions like the NZBA? First, they underscore the potential for grassroots activism to counterbalance institutional retreat from environmental commitments. While high-profile exits from climate alliances cast doubt on the efficacy of top-down approaches, bottom-up pressure fueled by NGO campaigns appears to be a promising alternative pathway to hold financial institutions accountable. Second, our findings highlight the critical role of constraining regulatory frameworks in enabling environmentally driven financial behavior and transparency. This supports recent governmental efforts to enhance the credibility and accountability of net-zero commitments, particularly through improved data availability that empowers NGOs to investigate financial institutions' ties to fossil fuel companies.