Members of the Net Zero Banking Alliance (NZBA) have voted to weaken key climate commitments, including removing mandatory targets and a requirement to support the transition towards a net-zero economy.
The UN-backed NZBA aims to bring together banks committed to “aligning their lending, investment and capital markets activities with net-zero greenhouse gas emissions by 2050”, according to its website.
The alliance has suffered a wave of defections since the beginning of the year. In January, the six largest US banks withdrew from the initiative, followed only weeks later by five leading Canadian banks.
The most recent departure, Dutch-headquartered Triodos Bank, announced its exit on April 15 – the same day the NZBA said its members had voted “overwhelmingly” to approve the new guidelines, following a year-long strategic review.
The changes include an acknowledgment of “a wider range of net-zero pathways” to limit global temperatures to below a 1.5 degrees Celsius rise, according to a press release from the NZBA.
Under the first and second versions of the guidance, published in 2021 and 2024 respectively, banks “shall” set goals and targets for meeting net zero and an emissions baseline. Under the new version, banks are only “recommended” to follow these guidelines.
According to both previous versions, “shall” means that a process is mandatory, whereas “should” applies to a process that is only “optional, but strongly recommended”.
Additionally, now banks should aim “to limit global warming to well below 2 degrees, striving for 1.5 degrees”. The 2024 version set this target as 1.5 degrees, with no mention of a 2-degree limit.
Members are additionally only recommended to set a 2030 and 2050 target, when previously the 2030 date was described as a “minimum” that could be met sooner. Additionally, the need to “support the transition towards a net zero economy by 2050” has been removed from the latest version of the guidance.
A majority of the remaining 120-plus members of the banking alliance, which include banks such as Barclays, HSBC and Santander, voted in favour of the changes.
Shargiil Bashir, NZBA chair and executive vice-president at First Abu Dhabi Bank, says all sectors, including banking and finance, needed to “commit to moving the needle on emissions reductions”.
“As the largest global initiative specifically focused on supporting climate mitigation action by banks, NZBA is uniquely positioned to provide practical support to banks navigating the net-zero transition. I welcome the decision by members to progress NZBA into its new chapter.”
Bashir told The Banker that 90% of the alliance’s members supported the reforms, which he hopes will encourage more banks to sign up.
Triodos, which describes itself as a sustainable bank, called the revised guidelines “less stringent” and “watered down”.
Lucie Pinson, director of NGO Reclaim Finance, says the NZBA had taken “a giant leap backwards”.
“In joining the alliance its members had admitted their responsibility to change the way they do business to accelerate the transition, but now, almost all have voted to say they are just going to follow the emissions trajectory of the economy and no longer feel a responsibility to shape it,” she says.
The vote of each individual member bank remains secret. Reclaim Finance is calling on each NZBA member to “declare its own position”.
Climate groups said that an anti-ESG sentiment had forced the hand of US banks to leave the organisation.
US President Donald Trump has pivoted away from his predecessor Joe Biden’s push towards achieving net zero, pulling the US out of the 2015 Paris Agreement – the main international treaty on climate change – and encouraging the use and production of fossil fuels.
Reclaim Finance accuses the banks of abandoning “their climate commitments apparently in fear of criticism from the incoming Trump administration”.
