Green capital – don't bank on it!

The international coalition of banks focused on climate goals has halted its operations due to a significant withdrawal of members over the past year.

Established in 2021 by the United Nations Environment Programme’s finance initiative, the Net Zero Banking Alliance (NZBA) aimed to align its members’ lending, investment, and capital market endeavors with targets of net-zero greenhouse gas emissions by 2050.

However, in the last year, several prominent banks, including UK giants HSBC and Barclays, have exited the coalition.

End of an Era

The remaining members of the NZBA have voted to dissolve the alliance as a member-based organization, as announced by the group on Friday.

All resources developed in recent years will still be accessible for banks seeking to commit to climate change initiatives.

A spokesperson for the alliance commented: “The Net-Zero Banking Alliance (NZBA) members have elected to move from a member-based structure and to provide our guidance as a framework.

“The Guidance for Climate Target Setting for Banks, along with the associated implementation resources, constitute the most widely recognized global banking framework targeting decarbonization efforts and will continue to be publicly accessible.

“Banks around the world can keep utilizing and referencing these tools to craft and fulfill their net-zero transition strategies. Consequently, NZBA operations will conclude immediately.”

Challenges Ahead

Following the election of Donald Trump in the United States in November last year, a number of the country’s largest banking institutions, including JPMorgan, Goldman Sachs, and Bank of America, departed from the alliance.

This aligns with a broader movement within corporate America, shifting towards more conservative political ideologies and retracting their climate pledges, diminishing sustainability investments, and withdrawing from climate initiatives.

This summer, HSBC and Barclays announced their departure from the group, following the exits of American banks.

Political disagreements regarding net-zero policies are intensifying in the UK, with the Conservative and Reform parties challenging the Government’s clean energy initiatives.

Campaigners have decried the exits of major banks from the alliance, asserting that it undermines global efforts to coordinate climate responses.

Crisis of Accountability

Jeanne Martin, co-director of corporate engagement at ShareAction, a responsible investment advocate, expressed her dismay: “It’s deeply disappointing to observe the largest banks choosing to distance themselves from accountability regarding their pledges to mitigate the severe impacts of climate change.

“The climate crisis escalates food prices, exacerbates health risks due to extreme heat—especially affecting vulnerable populations—and causes devastation to homes and communities through floods and wildfires.

“While some governments and corporations are scaling back their climate initiatives, public backing for action remains strong, with many investors acutely aware of the considerable economic risks posed by climate deterioration.

“Banking leaders need to display far greater courage at this critical juncture for our collective future and leverage their influence to elevate accountability standards regarding climate action in pursuit of a viable clean energy transition.”

Need for Intervention

Lucie Pinson, director of Reclaim Finance, asserted that the NZBA was “destined to fail.”

She noted: “Nonetheless, its dissolution clarifies that institutions genuinely dedicated to addressing global warming will persist in their initiatives.

“However, a substantial reallocation of financial resources towards solutions cannot occur without the intervention of policymakers and regulators.

“Their actions are vital to mitigating climate change and the systemic risks it poses. A central priority for both remains curbing the financing of fossil fuel expansion.”

Author Bio

Rebecca Speare-Cole serves as the sustainability reporter for PA.