⛔️ Financing from the six largest Wall Street banks for oil, gas, and coal projects fell 25% in the first seven months of 2025.
⛔️ Major banks have exited net-zero alliances amid political backlash and ESG fatigue, but say their transition plans remain.
⛔️ Private equity, not Wall Street, is filling some renewable financing gaps under costly terms.
By Irina Slav for Oilprice.com | Financing for oil and gas projects from the six biggest Wall Street Banks is on the decline, and it is a rather sharp decline. Since the start of this year, funding by banks to the hydrocarbons industry has fallen by a quarter, according to Bloomberg calculations. But it’s not because all the money is going into wind and solar.
Wall Street’s top players provided $73 billion in financing to oil, gas, and coal projects since the start of the year. This was down by 25% from the first seven months of 2024, with the decline most pronounced at Morgan Stanley. The bank lent 54% less to oil, gas, and coal companies this year than it did last year. JP Morgan, on the other hand, saw only a 7% decline in lending to oil and gas. Wells Fargo’s business with the energy industry declined by 17%.
All of the banks included in the Bloomberg analysis recently left the Net-Zero Banking Alliance and other net-zero-focused entities set up as part of efforts to turn the energy transition into an integral part of every corporate strategy. For a while, big lenders were very much on board, but then the backlash began from state governments in the U.S., who opposed the banks’ selective treatment of industries, which they called discrimination.
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On top of that, the net-zero alliances began making reporting and investment selection demands on the banks that, the latter said, would interfere with their principal business of making money for their clients. Indeed, the backlash was so strong that the Net-Zero Banking Alliance recently made a significant concession: it earlier this year decided to give its members “flexibility” in meeting their net-zero commitments by dropping a mandate for 1.5-degree alignment of these commitments. This did not help, and in recent weeks, another three banking majors, all from Europe, quit the group.
Yet, according to Bloomberg, the exodus does not mean that banks have dropped their plans for a transition to net zero. They are simply not talking about it as much as the term ESG becomes so toxic that some companies are refusing to use it at all. Indeed, the banks themselves claim their net-zero plans are very much in place and unchanged—so why are they not stepping in to replace government subsidies for all the wind and solar players that got hit by Trump’s budget bill? The short answer is that it is because this would be risky.
The Financial Times reported in June that private equity firms were stepping in to finance struggling wind and solar businesses—at a price. The report mentioned Apollo, KKR, Blackstone, and Brookfield as the new saviors of the energy transition, under “expensive and restrictive” terms, as is typical of private equity. There was, however, no mention of big Wall Street banks following in the footsteps of KKR and Brookfield.
So, what caused the decline in lending to oil and gas players, then? Softer oil prices, perhaps, had something to do with it, as companies revised their investment plans. According to JP Morgan, this may be the first year since 2020 that upstream investment in oil and gas is set for a decline.
“Drawing from data provided by 145 public companies during their 1Q25 earnings results, along with our estimates of private operators’ spending, we estimate a 1.1% ($5.9 billion) reduction in global upstream oil and gas development spending, bringing it down to $543 billion, marking the first year-over-year contraction since 2020,” the bank’s analysts said earlier this year, as quoted by S&P Global.
It is not that difficult to see why that might be. Uncertainty has become the word of the year for the energy industry—and not only that industry. Tariff wars, literal wars, radical changes in priorities for the federal government of the world’s biggest economy—all of this has encouraged even greater caution in the oil and gas space, which, not surprisingly, may lead to lower investments overall and therefore lower demand for bank funding.
Yet investment in oil and gas is necessary. Even the International Energy Agency, which four years ago said we could stop investing in oil and gas before the year’s end, this year did a 180-degree turn, saying at CERAWeek in March that “there would be a need for investment, especially to address the decline in the existing fields.”
OPEC has been warning about the insufficiency of investment in new supply for years now, yet its warnings have been dismissed by analysts repeatedly projecting an oversupply because of weaker demand due to Chinese EV sales—until physical demand and supply data show that the oil market, for instance, is quite tight and not in a glut at all.
So, the decline in funding for oil and gas projects may well be a reflection of the caution that is being exercised by industry players in the new political environment. It could be a normal response to the weaker price context, which generally tends to discourage much spending on additional supply. What it is not, however, is a transition from oil and gas to wind and solar.
By Irina Slav for Oilprice.com
