Abstract
Banks face increased scrutiny over their climate commitments as global focus on environmental sustainability intensifies. However, little is known about the financial impact of leaving voluntary climate alliances. Recent high-profile withdrawals by major U.S. banks from the Net-Zero Banking Alliance (NZBA) have sparked debate over how markets will react to these changes in sustainability policies. This study investigates whether investors interpret these exits as signals of reduced environmental commitment or as strategic moves to lower political and regulatory risks. We analyze abnormal and cumulative abnormal returns for six major U.S. banks following their NZBA exit announcements using an event study approach. Results show no significant negative abnormal returns on the event dates, indicating that reversing ESG commitments does not always decrease firm value. Broader market forces appear to have contributed to positive returns, with some banks, such as Citigroup and Morgan Stanley, experiencing notable positive abnormal returns shortly after their announcements. However, a control group suggests that wider market movements also influenced these gains, urging caution in attributing responses solely to strategic ESG actions. Our findings imply that, while exits did not consistently trigger negative reactions, overall market sentiment heavily influences investor responses. These findings have important implications for regulatory policies and corporate disclosure practices, highlighting the need for transparent communication of sustainability goals beyond participation in official alliances. Nonetheless, these findings should not be taken as conclusive evidence that markets uniformly endorse exits as strategic ESG signals, given the impact of broader market trends.