Net Zero Banking Alliance suspends operations, members to decide on alliance's future

The global alliance of banks, which has lost most of its US members and recently two major European members, has decided to suspend its activities and let its members vote on changing it from a formal alliance into a looser association. The result of the vote will be known in two months.

US banks left the alliance at the beginning of this year, and recently European banks HSBC and Barclays also withdrew. The Net Zero Asset Managers Initiative, the equivalent for asset managers, is in a similar “frozen” state. This followed the departure of BlackRock and several other asset managers.

This development comes despite the group voting in April this year to ease its requirements. Members are no longer required to aim to limit global warming to 1.5 °C above the pre-industrial era, as required by the Paris Agreement.

In a statement, the alliance said that changing its model could help members “accelerate the real-economy transition”. In its announcement that it was leaving, HSBC said it remained committed to its long-term targets for 2050 and would finance clients in “all sectors”.

The alliance was founded by banks in 2021 with strong support from Mark Carney, then governor of the Bank of England and now prime minister of Canada. It provided banks with a framework for developing and implementing strategies to achieve net zero, including setting targets and monitoring progress towards them.

Reactions and the future

Lucie Pinson of the Reclaim Finance group told the Financial Times that the pause was “a way to avoid the embarrassment of losing relevance after the departure of its largest members”. She added that the situation was “absurd” and that, in her view, “the group never really challenged the business models of major banks, which are built on fossil fuels”.

The future of the alliance and its model, as well as of the climate policy system as a whole, is uncertain. Since Donald Trump was elected, some businesses have visibly shifted their approach to climate targets. In some Republican states, there has also been coordinated pressure on banks and other institutions aimed at stopping “ESG overreach”.

However, it is worth noting that interest in climate commitments persists, for example among some bank shareholders. As the Wall Street Journal reported, many US banks faced disgruntled shareholders after leaving the alliance, who were concerned that the banks would be unable to answer questions about “long-term climate risks”.