Citigroup and Bank of America announced their withdrawal from the Net Zero Banking Alliance, an international banking body committed to decreasing greenhouse gas emissions. This withdrawal is just after Wells Fargo and Goldman Sachs exited the same alliance last month.

The NZBA was established to encourage financial institutions to lower carbon emissions in their lending and investment portfolios to zero by 2050. However, these recent withdrawals indicate a change in how banks are approaching environmental goals, especially considering political pressures and market dynamics.

Banks and Environmental Commitments

Financial institutions, including Citigroup and Bank of America, had set out earlier on a path toward making net-zero commitments. Citigroup, for instance, said it had achieved important progress toward its emissions targets but was exiting the NZBA as part of a broader shift in strategy.

Bank of America followed suit, saying it would continue to work with clients on sustainability but not remain in the alliance.

This is not an isolated phenomenon. Indeed, both Wells Fargo and Goldman Sachs withdrew from NZBA just recently. Such a step only shows the rising conflict between the financial sector’s green campaign and the politics. Most of the Republican legislators have condemned these measures for it might reduce the financing of fossil fuels to damage businesses as well as prevent job growth.

Also read: Wells Fargo Exits Global Net-Zero Banking Alliance

Political Backlash and Industry Reactions

One of the main reasons behind these departures is the pressure from conservative politicians. Some argue that pushing for net zero goals could hinder energy production and increase costs. Texas, along with several other Republican-led states, recently filed a lawsuit against major asset managers like BlackRock and Vanguard, accusing them of reducing coal production and driving up energy prices.

Despite the growing political resistance, these banks have stated their commitment to addressing climate change. They insist they will continue working with clients to meet their sustainability needs, albeit without being part of the NZBA.

The exits of Citigroup and Bank of America from the Net-Zero Banking Alliance signal a shift in the financial sector’s approach to climate goals. While they remain committed to working on environmental issues, their decisions show the delicate balance they must strike between sustainability and political considerations.

Aypa Power, which develops hybrid renewable energy projects and utility-scale energy storage systems, recently finalized a $190 million financing package for the construction of its Bypass Battery Energy Storage System (BESS) in Fort Bend County, Texas. The 200 MW/400 MWh project would further establish Texas as a leader in energy storage by addressing the rising demand for power in the Houston area and improving the dependability of the state’s electrical system.

Financing Details and Key Partners

The $190 million financing includes a $68 million Construction-to-Term Loan and a $91 million Tax Equity Bridge Loan (TEBL), bringing the total construction funding to $159 million. The project also secured $31 million in Letters of Credit, with $26 million allocated explicitly for project-related expenses.

A key element of the financing is the tax equity commitment from Morgan Stanley Renewables Inc., which has pledged $94 million through a hybrid partnership flip structure. This pioneering financing model allows for the required capital to undertake large-scale projects, such as the Bypass BESS.

SMBC was Administrative Agent and Green Loan Coordinator, while Santander was Coordinating Lead Arranger. Siemens Financial Services was Joint Lead Arranger in partnership with Aypa Power, among others. This partnership has been strategic as it represents mutual commitment to developing leading-edge energy storage solutions.

A Game Changer for the Grid of ERCOT

Bypass BESS will be the very first totally contracted energy storage in the market place of the ERCOT system. The project will store excess renewable energy and release it during peak demand, improving grid reliability and stabilizing supply.

Bill Nguyen, Executive Vice President of Finance at Aypa Power, said, “This financing milestone highlights Aypa Power’s ability to deliver projects that set new standards in the market.”

He added, “As one of the first fully contracted energy storage projects in ERCOT, Bypass BESS demonstrates how innovative financing structures and strong partnerships can deliver critical infrastructure to meet the region’s growing power needs.”

Also read: MARA Acquires Wind Farm in Texas

Economic Impact on Fort Bend County

Beyond its environmental and grid-stabilizing benefits, the Bypass BESS project will also contribute significantly to the local economy. During peak construction, the project will create hundreds of jobs. Once operational, the facility is expected to generate about $20 million in tax revenue, benefiting Fort Bend County long-term.

Jorge Iragorri, Head of Renewable Energy Investments at Morgan Stanley, stated the importance of the project,”We are excited to partner with Aypa Power and Blackstone on this innovative ERCOT BESS project and continue building grid infrastructure for the growing electrification needs of the U.S.”

Texas continues to lead in energy storage, and the Bypass BESS project will be key to the state’s energy future.