Goldman Sachs and the end of the Financial Sector's climate alliance era

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(David Callaway is founder and Editor-in-Chief of Callaway Climate Insights. He is the former president of the World Editors Forum, Editor-in-Chief of USA Today and MarketWatch, and CEO of TheStreet Inc. His climate columns have appeared in USA Today, The Independent, and New Thinking magazine).

Goldman Sachs Group’s departure this week from the Net-Zero Banking Alliance, which was created with great fanfare after the raucous COP26 Glasgow climate summit in 2021, is more than just another defection of a top tier bank from another alliance. It’s a symbol of the end of the era of climate bravado and hype on Wall Street.

Gone are the days when banks and asset managers were spinning out environmental, social and governance (ESG) funds as fast as their marketing departments could promote them and joining high-profile groups to push the world toward an energy transition away from fossil fuels.

That transition is happening anyway, but with a new focus on feeding dramatic increases in energy demand for data centers and AI production. Such increases will be as good — or better — for renewable energy growth as the painful process of twisting arms of companies to divest or reduce their oil and gas use was the last few years.

Wall Street loves a trend, and right now the trend is less regulation and a new gold rush to AI, as risky as that might seem.

Time waste
In this new era, there is little appetite for the seemingly endless rules and procedures generated by climate alliances and regional regulations. Goldman simply grew tired of wasting its time on it while there were bigger fish to fry.

As the U.S. adapts to a new administration focused on light regulation and full-steam-ahead risk taking, Wall Street is back doing what it does best. Sustainability investing remains a priority, if only because it can be extremely profitable. But in terms of a mission statement on Wall Street, it’s become a word best not spoken. For now.