Banks looking to cash in on the $1.7 trillion listing of Saudi Aramco will miss out on millions of dollars of fees after concerns about climate change and a high valuation led to weak demand for the oil giant’s shares.

Environmental groups hailed the news as a potential turning point and a warning to investors about the future of fossil fuel firms.

The huge deal, which will still be among the largest ever stock market flotations, was forecast to generate $300m (£232m) of fees for banks including JPMorgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Citigroup, HSBC, and Credit Suisse.

But fears about Aramco’s business model have led to a tepid reception, with banks now expected to net “just” $90m.

Saudi Arabia’s initial valuation of up to $2 trillion turned out to be substantially more than investors were willing to pay – even for the world’s most profitable company.

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An international roadshow aimed at selling Aramco’s shares has been scaled back after investors baulked at the price tag which is based on decades of predicted future oil production and high global prices.

A coalition of environmental groups – Rainforest Action Network, BankTrack, Earthworks, Friends of the Earth US, Global Witness, Indigenous Environmental Network, Oil Change International, ShareAction, Sierra Club, and 350.org – had warned banks to stay away from selling shares in the world’s largest corporate emitter of carbon dioxide. That did not stop 25 banks piling in to advise on the sale.

“This is a whopping black eye for [JPMorgan chief executive] Jamie Dimon, and for the bank chief executives,” said Patrick McCully, a director at Rainforest Action Network.

“They were misled by their own greed to think that in an era of acute concern over climate change they could still make out like bandits from this deal while ignoring concerns about the Saudi government’s human rights record and its goals to expand oil and gas production.”

It was announced last week that Aramco’s shares would only be formally marketed in Saudi Arabia and allied Gulf states, and not in America and Europe as had been planned.

The banks involved have reportedly begun “turning on each other” as they fight for a significantly reduced pot of fees from the deal.

Aramco’s valuation was highly dependent on oil prices that won’t materialise, said Hannah McKinnon, a director at Futures for Oil Change International.

She added: “This is writing on the wall that obviously others are seeing as they flee the scene on the most carbon-intensive offering in history. Chase, Citi and others would do well to re-evaluate their substantial backing of fossil fuels in light of the market’s clear scepticism that oil demand will continue to grow.”

Johan Frijns, director of BankTrack, said: “Just two months after the launch of the Principles for Responsible Banking, prominent signatory banks such as Citi and Credit Suisse have no issues with getting involved in this IPO, this despite Saudi Arabia’s horrendous human rights record and the immense climate impact that will result from an expansion of oil production by Aramco.

“These banks claim to be concerned about climate change and human rights, yet their involvement in the Aramco IPO makes it grimly clear that their heads are stuck firmly in the sand.”