Governments and financial institutions across the Western world are retreating from climate pledges. In the East, China could potentially fill the gap.

Less than one month since his inauguration as the 47th President of the United States, Donald Trump has made a flurry of seismic moves including in the field of climate change. He has ordered a US withdrawal from the Paris Agreement, rescinded climate funding and is exploring legal options to cancel loans issued in a $400 billion clean energy tech program.

Within the financial sector, numerous prominent US institutions have made related moves. In addition to a new Trump administration that backs traditional energy sources, they have also felt pressure from a group of state attorney generals raising concerns about antitrust and consumer protection law violations from financial restrictions of the net-zero agenda.

Major US lenders including Bank of America, Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley and Wells Fargo have all exited the United Nations Net-Zero Banking Alliance (NZBA). Fund giant BlackRock also left the Net Zero Asset Managers initiative.

Not Just the US

The shifts are not limited to the US.

Canada’s largest lenders – Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Bank – have all left NZBA. This week, Macquarie became Australia's first lender to quit the alliance. Sergio Ermotti, CEO of Swiss banking giant UBS, is also looking at whether or not to follow suit with its peers in abandoning NZBA.

Filling the Gap

China is believed to be a potential candidate to fill the gap, given its historical track record as a significant provider of climate-related capital.

In green bonds, for example, China’s government and companies have issued more than $540 billion since 2015, making it second only to the US. In early 2024, Bank of East Asia announced that it became the first Hong Kong-headquartered bank to join NZBA.

«Last Savior»?

There are varying views on the potential consequences if China fails to step up its green finance efforts. According to a note authored by Sophie Chardon, Lombard Odier’s head of sustainable investment, private bank, China will play a «more central role in multilateral agreements» under the new environment though there is «no threat to sustainability transition globally».

But others hold a starkly different outlook, viewing Chinese participation as a make-or-break matter.

«China is the last savior of the green transition,» warned Natixis APAC chief economist Alicia Garcia Herrero during a briefing in Hong Kong, according to a «Bloomberg» report.