The Net-Zero Banking Alliance – the world’s largest climate-finance group for banks – is weighing significant changes to its operating model following a spate of high-profile departures. Sources suggest the alliance is considering scrapping its current mandate, which requires members to align their portfolios with a target of limiting global warming to 1.5°C, in favour of a less stringent “well below 2°C” limit. Such a shift would mark a stark departure from the group’s founding principles.
A spokesperson for the alliance confirmed that a strategic review is underway, noting that the group was designed to be adaptable to changing conditions. However, insiders indicate that the ongoing deliberations remain far from final, with further discussions scheduled among the steering group later this month and a proposal expected to be submitted to remaining signatories in March.
The review comes after the alliance, which was established just four years ago and once represented over 40 per cent of global banking assets, has suffered a series of high-profile exits. Goldman Sachs was the first to withdraw shortly after the US presidential election, with JPMorgan Chase following suit in early January – a move that left the alliance devoid of major US banks. Canadian banks soon followed, effectively erasing North American representation.
In response to the defections, the NZBA has announced plans to explore a “next phase” to help member banks implement their individual climate strategies more independently. Options on the table include not only revising the 1.5°C target but also potentially moving away from using financed emissions as the sole metric for evaluating a bank’s climate performance.
The review has drawn a mixed reaction. While European and Asian lenders have broadly signalled their support for the alliance, some have expressed reservations about committing to the existing stringent targets. HSBC, for instance, has already hinted that it may need to recalibrate some of its emissions goals in light of the slower-than-expected pace of decarbonisation.
With net zero alliances across sectors also grappling with similar challenges – including recent reviews by the Net Zero Asset Managers initiative and mass defections in net zero groups for insurers – the future of such initiatives remains uncertain. Critics, including figures from the Trump administration, have long been sceptical of net zero ambitions, with some labelling the concept as “sinister” and “terrible”.
For now, the NZBA’s strategic review is expected to continue through the second quarter, as it attempts to stabilise membership and redefine its operational criteria in a rapidly evolving climate landscape.
