NZBA’s fate to be decided by the end of September

The fate of the Net Zero Banking Alliance hangs in the balance after a raft of major banks decided to end their membership this year. Its new shape is set to be announced by the end of September.

Remaining members have been asked to vote on a proposed transition away from a membership-based alliance where members commit to climate targets to a new framework initiative simply sharing guidance on how banks can contribute to the climate transition.

“The Steering Group believes this is the most appropriate model to continue supporting banks across the globe to remain resilient and accelerate the real economy transition in line with the Paris Agreement, as well as to continue engagement with the global banking industry to develop further guidance and tools needed to support them and their clients,” NZBA said in a statement.

The vote was initiated on August 27, and results will be shared next month. In the meantime, the alliance has paused its activities.

NZBA’s rise and fall

Launched at COP26 in 2021, the Net Zero Banking Alliance brought together 43 founding banks with assets of US$28.5 trillion behind a commitment to “align operational and attributable emissions from their portfolios with pathways to net-zero by 2050 or sooner”.

Any bank who joined the alliance had 18 months to set 2030 targets for the decarbonisation of their financed emissions, starting with high-emitting sectors and then aligning their entire portfolios to net zero by 2050.

Founding members included Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC, Morgan Stanley and UBS. By October 2024, the alliance counted 122 members – 97% of which had set their climate targets.

But in December 2024, on the back of Donald Trump’s reelection as US President, things took a turn. Goldman Sachs was the first to exit as Trump’s and conservative states’ anti-ESG policies started to take hold – and was promptly followed by all of Wall Street, top Canadian banks and some Australian peers.

Read also: Anti-ESG pushback - a chance for sustainable finance to grow into its own

What next for the Net Zero Banking Alliance?

In response, NZBA softened its climate target requirements for members, recognising that banks are likely to struggle to meet their goals as the climate transition is taking longer than planned. But in July, the NZBA exodus reached the shores of Europe with HSBC, UBS and Barclays’ exit.

The alliance has now lost most of its largest founding members, and remaining banks are bound to question their continued membership in such a smaller movement. This leaves NZBA at a turning point.

“Recognising there is major opportunity for banks and key stakeholders to build on the Alliance’s outputs and to accelerate action on key priorities, NZBA encourages the banking sector to remain steadfast in implementing their net-zero commitments,” the alliance added.