Net Zero Banking Alliance folds, marking a new phase for climate finance

After four years, the banking industry’s signature joint effort to advance Paris Agreement-aligned climate targets is no more. The roughly 120 members of the Net Zero Banking Alliance (NZBA) said on Oct. 3 they will stop work immediately.

Their decision was no shock to many watching the group contract over the past 11 months. The alliance had been on hold since Aug. 27 pending a collective decision about its fate.

But the permanent end sparked both outrage and resignation from activists, with some calling financial institutions cowards for folding to anti-ESG pressure by President Donald Trump and legal threats by Republican lawmakers. Other experts, however, insisted that the alliance’s closure reflects climate finance moving into a new, action-oriented stage.

Whatever the case, the blush of excitement had long worn off since the banking alliance launched in 2021 under the United Nations-backed Global Financial Alliance for Net Zero (GFANZ). At its peak, the NZBA included more than 140 members in more than 40 countries. In December, JPMorgan Chase triggered an exodus that resulted in departures by the biggest U.S. and Canadian banks, as well as HSBC, Barclays and UBS of Europe.

By January, the GFANZ umbrella group had restructured, weakening itself. Many of its eight sub-organizations lowered their original ambitions. (The Net-Zero Insurance Alliance disbanded completely in 2024.)

‘Doomed to fail’

“We won’t mourn the NZBA,” said Lucie Pinson of Reclaim Finance, a Paris nonprofit that lambasted banks for financing fossil fuels twice as much as it backs cleaner alternatives. “Like other financial alliances of its kind, it brought little — if anything — to the climate, and was doomed to fail. Its purpose was never to take real action, but to create the illusion of measures in order to ward off the risk of regulation.”

The group urged policymakers and regulators to force the issue — that is, to stymie the oil and gas industry while boosting sustainable alternatives. Over the past nine years, the biggest banks in the world have forked out $7.9 trillion to Big Oil, according to the Banking on Climate Chaos report that Reclaim Finance produced with the Sierra Club, Bank Track and other nonprofits.

“Senior bankers need to be far more courageous in this decisive moment for all our futures and must use their influence to push up standards for accountability on climate if we are to stand any chance of making the clean energy transition happen,” stated Jeanne Martin, co-director of corporate engagement at ShareAction, who called the banking alliance’s cessation “bitterly disappointing.”

‘Good news overall’

The NZBA’s contraction reflected an evolution from “collective action to collective learning,” according to Brian O’Hanlon, managing director of climate-aligned finance at the Rocky Mountain Institute in Washington, D.C.

For example, bank financing is beginning to tilt in favor of low-carbon energy, according to Bloomberg New Energy Finance in January. For every dollar in 2023 that fueled high-carbon fuels, 89 cents supported cleaner wind and solar or grid technologies, it noted.

The Environmental Defense Fund supports that view. “There has been a pivot away from aspirational target setting towards a focus on concrete projects and the complex financial mechanics needed to make them happen and scale them,” said Andrew Howell, head of research in sustainable finance at EDF, based in New York. “This is good news overall.

Falling by the wayside, per Howell: the idea that commercial banks might sacrifice returns for net zero.

“Climate finance, like other types of finance, needs to be delivered in a way that produces competitive risk-adjusted financial returns,” he said. “And the good news is that this is in fact happening across the economy.”

What’s left

“At least [the alliance’s] demise brings clarity: the institutions genuinely committed to containing global warming will continue to act,” added Pinson of Reclaim Finance.

Meanwhile, the guidelines and responsibility for banks to support the low-carbon transition remain the same, according to the Global Alliance for Banking on Values. It advocates for divesting from fossil fuels and financing renewable energy.

“It has always been the primary responsibility of banks to chart their own course in terms of impact and transparency,” said a spokesperson at the Amsterdam nonprofit, which represents more than 70 values-led banks. Those include Amalgamated Bank and Climate First Bank, which were two of the three remaining U.S. members of the NZBA. Areti Bank bank was the other.

Beneficial State Bank of Oakland, California, had aspired to join the NZBA. “With the alliance folding, we’ll lose critical opportunities for accountability and shared learning,” said Terra Nielson, the bank’s executive vice president and chief impact officer. With less guidance and coordination, major banks are focusing on the short-term headwinds rather than the long-term risks of propping up high-emissions industries, she added.

The Net Zero Banking Alliance will keep available its latest guidance framework public for financial institutions. The 20-page document advocates for banks to set Paris-aligned, near- and long-term net zero goals; to annually report on emissions related to their investments and other activities over a baseline year; to back up targets with science-based decarbonization scenarios; and to regularly align goals with the latest science.