Last month reports emerged that the NZBA (Net Zero Banking Alliance) was set to canvas its members on proposed changes following a year-long review of the group’s climate commitments. Now the results have been revealed, showing that members have ‘overwhelmingly’ backed dropping the 1.5-degree alignment, as well as agreeing to a watering down of wider climate goals.
The vote means that banks should now aim to limit global warming to well below 2 degrees, striving for 1.5 degrees. The previous NZBA requirements set this target as 1.5 degrees, with no mention of a 2-degree limit. The NZBA says that it acknowledges a wider range of net-zero pathways that align with the temperature goals of the Paris Agreement. They add that this increases flexibility for banks with exposures to a range of markets and sectors to manage targets and transition across their balance sheet. In addition, the changes mean that broader climate requirements have effectively been converted into non-binding “best practice” guidance.
The NZBA, which is bank-led and UN-convened, represents major global banks committed to aligning their lending, investment, and capital market activities with net-zero greenhouse gas emissions by 2050. The Alliance, which was founded in 2021, has more than 120 members from 44 countries, collectively managing $50 trillion in assets[i].
However, in recent months the group has been hit by a wave of departures, including all six of the largest US banks – JP Morgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo, and Goldman Sachs. On the same day that the vote results were announced (15th April), Dutch-headquartered Triodos Bank also announced its exit, citing the vote results as its reason for doing so. In a press release the bank explained:
“Triodos Bank believes that by only 'encouraging' members to set and publicly disclose targets to support meeting the temperature goals of the Paris Agreement, the new guidance provides too much leeway for banks. Triodos Bank also disapproves [of] letting go of the requirement to have a 1.5 degrees Celsius target.”[ii]
They added: “The reality is that the global economy is not on track to stay within safe levels of warming and more needs to be done, rather than less… Global cooperation is essential to ensure banks align their portfolios with the 1.5℃ scenario. However, the shift from strict requirements to more lenient guidance significantly undermines the effectiveness of the NZBA to achieve this.”
Announcing the outcome, the NZBA said the changes reflect a rapidly evolving external landscape and aim to provide member institutions with greater flexibility in meeting their individual climate goals.
“We are halfway through the critical decade for action on climate, and we need all sectors, including banking and finance, to commit to moving the needle on emissions reductions,” said Shargiil Bashir, NZBA Chair and Chief Sustainability Officer, “As the largest global initiative specifically focused on supporting climate mitigation action by banks, NZBA is uniquely positioned to provide practical support to banks navigating the net-zero transition. I welcome the decision by members to progress NZBA into its new chapter.”[iii]
The NZBA development follows a growing trend, as political changes shift climate attitudes. Earlier this year BlackRock, the world’s largest asset manager, announced its departure from the Net Zero Asset Managers initiative (NZAM), as a ‘climate climbdown’ spread amongst US firms prior to Donald Trump’s inauguration as US President in mid-January. NZAM, which launched in December 2020, asks signatories within the asset management industry to support the goal of net zero emissions by 2050, along with a commitment to support investing aligned with net zero emissions by 2050 or sooner. The initiative’s website states that signatories include more than 325 asset managers, representing $57.5 trillion in assets[iv]. Following BlackRock’s departure, NZAM suspended key reporting and tracking activities.
[i] Members – United Nations Environment – Finance Initiative
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
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