In addition, a number of the largest US banks—Goldman Sachs, Citi, and more—have recently withdrawn from the Net-Zero Banking Alliance (NZBA). If true, this move undermines the credibility of climate finance and the climate sustainability of the financial sector. The NZBA was launched in 2021 with 43 founding signatories. Their purpose is to accelerate the transition to net zero greenhouse gas emissions by 2050 through their lending, investment and capital markets activities. Today, there are 135 financial institutions left in the alliance, most of the major European banks among them.
The loss of these American banks might shift the balance of power within the NZBA. This change would likely allow the other members—now a clear majority—to set bolder, more ambitious climate targets. From Mary Anna’s piece, the exodus has climate advocates and analysts alike concerned about the impact of that exodus. Several of the banks exiting had been the top fossil fuel financiers since the adoption of the Paris Agreement.
The NZBA: A Commitment to Climate Action
While the NZBA was convened by the United Nations Environment Programme’s finance initiative, it is entirely self-led by its banking members. Its overarching mission is to accelerate the world’s transition to a sustainable economy. It achieves this by ensuring that banks put their financial—or fiduciary—interests in line with achieving climate goals. Of the founding members, Société Générale, BNP Paribas and Crédit Agricole were the most instrumental. From 2020 to 2023, these banks each reduced their fossil fuel funding by at least 50%.
Regardless of the recent departures, a number of banks are still publicly expressing their dedication to the NZBA’s goals. Philippe Brassac, CEO of the Crédit Agricole, succinctly captured the importance of their membership. He affirmed that the bank’s participation in the NZBA is here to stay. In the same vein, Slawomir Krupa, CEO of Société Générale, commented that they are “not planning to walk away” from the alliance.
“The climate emergency has never been so strong.” – Philippe Brassac
Paddy McCully, a senior analyst at NGO Reclaim Finance, expressed fears about the prospect of current NZBA members stagnating. This was to the contrary of even repeated reaffirmations from those other panelists. He agrees that though some banks were re-educating themselves and starting to demonstrate some commitment, outside forces have made it more difficult for them to move with conviction.
The Impact of US Banks Exiting
The most recent withdrawals from the NZBA were in fact ten of the top 21 fossil fuel financiers since the adoption of the Paris Agreement. In fact, five Canadian banks have bolted from the alliance. These banks include TD Bank, Bank of Montreal, National Bank of Canada, Canadian Imperial Bank of Commerce, and Scotiabank. Analysts attribute this trend to various factors, including legal threats from attorneys general in Republican states claiming that the NZBA coalition breached competition laws.
According to McCully, state-level attorneys general have sown panic in the ranks of banks and investors over any mention of climate change in disclosures. He noted that “State-level attorneys general have been launching various threats against banks and investors if they make any noise or indicate concerns about climate change.” This new political climate, perhaps supercharged by the election of Donald Trump, caused banks to reconsider their membership within the NZBA.
“But obviously the straw that sort of broke the camel’s back was Trump getting elected and realizing that the attacks were going to intensify.” – Paddy McCully
The U.S.-China rivalry, coupled with rising geopolitical tensions caused by Russia’s invasion of Ukraine, has increased pressure on American banks. Most leaders decided to withdraw from the NZBA to prevent the fury from right-wing enraged critics. Yet what was lost on these banks wasn’t significant, McCully noted. Though internal explanations abound, many of them weren’t all that serious about the alliance’s aims to begin with.
Opportunities for Remaining Members
The departure of US banks poses difficulties. It presents an incredible opportunity for the remaining members to strengthen their climate action strategies. Analysts claim European banks had been limited by their American peers’ unwillingness to commit to stronger targets. With these banks leaving the field, European institutions may have an opportunity to advocate for more ambitious commitments at the NZBA table.
Jacco Minnaar, another analyst in the field, acknowledged the bad and good in equal measure. He stated, “Their departure is distressing because it reduces our scope for action, but it provides an opportunity for a strong ‘coalition of the willing’ to take the NZBA forward and show what climate action really looks like.”
As negotiations about the new shape of climate finance continue, the other 11 members have a special chance. Or, they can reset their aspirations and show the world what climate leadership really looks like. Analysts warned that actual implementation and loud commitment will be key in order to restore confidence in funder-driven climate finance efforts.
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