Banks won't police themselves on climate issues; New York should

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The California wildfires are only the most recent example that climate change is both deadly and costly. Here in New York, we've been hit by ever-increasing hurricanes, storms, floods, heat waves and other climate disasters that have caused billions of dollars in damage, destroyed homes and businesses and killed people.  

Yet the recent withdrawal of six major U.S. banks — Citigroup, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley and JPMorgan Chase —  from the Net-Zero Banking Alliance, or NZBA, proves banks aren't taking climate-driven financial risk seriously enough. They won't keep their emissions reduction promises voluntarily, and the Trump administration obviously won't make them. But New York State can.

The six banking giants have repeatedly reiterated that they understand the massive financial risk that climate change poses to every investor — including everyone with a retirement account — and promised to do their part to help reduce global emissions. But in the face of political pressure from GOP Big Oil allies and right-wing political opportunists like Ohio Rep. Jim Jordan, they've now chosen retreat over resilience. They've abdicated their climate leadership role. They've left taxpayers exposed to future bailouts, and left the entire economy vulnerable to the impacts of a shock that will play out over generations.

Watching these banks go back on their word reminds us of a hard truth: We can't count on voluntary action to address the climate crisis, because short-term profits and political convenience will often win out over long-term rational behavior. But New York, the world's biggest financial center, can bring them to heel. Through new rules requiring them to use their economic leverage to steer industries like energy, agriculture and manufacturing toward net zero emissions, our state can lead the nation, be an example to the world and safeguard us against the Trump administration's likely rollbacks.

Every bank knows climate change is the most disruptive economic event of our lifetimes, and it's accelerating. They know climate disasters put investment returns at risk; they know their financial heft can change corporate behavior across the economy. Accordingly, all the majors have made proud and loud emissions reduction commitments. Over 140 banks have joined the NZBA since its 2021 founding, and they've all committed to ramp down their financing in polluting sectors like oil, gas, and animal agriculture, and ramp it up in clean energy and other industries of the future.

But all the glossy sustainability reports in the world aren't worth anything if the banks won't stand up to right-wing political pressure. To hold them to account, we need robust and enforceable regulations. And we won't get them from the Trump administration, which has proudly signaled it will take us in the opposite direction by gutting environmental policy and putting the weight of the federal government behind climate change deniers and other right-wing extremists.

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This gives New York an opportunity. Can our state ensure the financial sector is leveraging its economic heft to steer the economy toward net zero? As the financial capital of the world — and home to Wall Street and many of the nation's biggest banks and investment firms — we can.

Our state is positioned better than any other to convert the banking industry into a force for change. By stepping into the regulatory gap, New York can advance Paris Agreement goals on behalf of the United States and protect the world's population, and our own, from the threats of unchecked climate change to our economy, our social stability and our very lives.

To do it, New York must enact bold measures that compel banks to prioritize climate resilience over short-term profit. Transparency is the first step: We must require banks to measure and disclose Scope 1, 2 and 3 emissions, which includes not just the emissions they generate themselves, but the ones they finance and facilitate. Then, banks must align their lending, investing and capital market activities with credible emissions reduction plans. This means phasing out financing for fossil fuel expansion and high-carbon activities, and prioritizing investments in renewable energy, which we can encourage through incentives.

Just as importantly, if banks are making big climate promises and then undermining them by lobbying to kill or water down climate-friendly policy, their hypocrisy should be brought into sunlight through mandatory lobbying disclosures.

New York is the epicenter of global business and the backbone of the U.S. economy. If New Yorkers lead, we can exert decisive leverage over how the financial sector responds to climate change, and set a national regulatory standard for other states to follow as companies across our economy work together to meet the challenge head-on. GOP politicians in states like Texas have cost taxpayers and investors hundreds of millions of dollars by enacting climate-denying legislation. We should choose another path. Let's not wait for the next round of climate catastrophe to bring down the entire financial system before we do it.