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Major banks quit climate alliance
23/4/2025
News
The recent withdrawal of major banks in the US, Canada, Australia and Japan from the Net Zero Banking Alliance (NZBA) could weaken the speed of decarbonisation and encourage other financial institutions to deprioritise their climate commitments, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).
Despite previously promoting strong climate commitments, major banks (see list below) have performed an about-face by exiting the NZBA – a significant UN-backed initiative. IEEFA’s report says that this alarming trend is likely to reduce trust in the banks by environmentally conscious customers, investors and policymakers. Furthermore, the move may also lead to fragmented, non-standardised reporting practices, making it difficult for investors and policymakers to make informed decisions.
The NZBA was founded ahead of COP26, as an alliance of 144 banks in 44 countries, representing 41% of global banking assets, with combined assets of $74tn. It was a global initiative committed to aligning their lending and investment portfolios with net zero emissions by 2050. It provided a framework for setting credible, science-based targets that requires banks to publicly disclose planned actions and progress toward achieving these goals.
However, since 2024 major banks have been exiting the NZBA. And this has cast a shadow over international climate commitments. A wave of departures began with leading US banks Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo – later extended to top Canadian banks and major Australian lender Maquarie, as well as five Japanese banks in recent weeks this year. The banks that have left the alliance accounted for almost 39% of the total assets.
There are concerns that the departure of several major American banks from the NZBA may reflect shifting political and legal dynamics, including increased scrutiny of environmental, social and governance (ESG) policies, which some banks have cited as ‘legal risk’ and a ‘contributing factor’ in their decisions.
While most banks claim that their climate goals remain unchanged, these exits from climate alliances have raise questions about the consistency and credibility of these commitments.
IEEFA notes that the NZBA and the Net Zero Asset Managers Initiative (NZAM) were designed to hold financial institutions accountable for their climate commitments while advancing the energy transition and global decarbonisation efforts. ‘The withdrawal of these influential banks raises the risk of other institutions deprioritising their climate goals,’ says the Institute. Moreover, these departures can lead to divergence in reporting practices, making it harder to track progress and hold institutions accountable.
