CarpeDiem IAS • CarpeDiem IAS • CarpeDiem IAS •

Net-Zero Banking Alliance halts activities as global banks exit membership

28 Aug 2025 GS 3 Environment
Net-Zero Banking Alliance halts activities as global banks exit membership Click to view full image

Net-Zero Banking Alliance (NZBA)

Introduction

  • Established: April 2021

  • Convened by: UN Environment Programme Finance Initiative (UNEP FI)

  • Nature: A bank-led, UN-convened alliance of leading global banks.

  • Aim: To align lending, investment, and capital markets activities with the goal of net-zero greenhouse gas (GHG) emissions by 2050.

  • It functions as the climate accelerator for the UNEP FI Principles for Responsible Banking (PRB).

Governance

  • Steering Group and Chair: Selected by member banks, ensuring diversity of geographies and business models.

  • Support & Convening: UNEP FI Secretariat.

  • United Nations: Holds a seat on the Steering Group.

  • Framework: Operates under the NZBA governance document (adopted October 2021, updated August 2023 and March 2024).

Member Commitments

Banks that join must:

  1. Net-zero transition

    • Transition operational and attributable GHG emissions in portfolios to net-zero by 2050 or earlier.

  2. Target-setting

    • Within 18 months of joining, set:

      • 2030 (or sooner) target

      • 2050 target

      • Intermediary 5-year targets from 2030 onwards

    • Focus first on priority GHG-intensive sectors (e.g., power, oil & gas, steel, transport).

    • Additional sector targets within 36 months.

  3. Disclosure

    • Annually publish absolute emissions and intensity, following best practices.

Current Issue

  • In August 2025, six of the largest U.S. banks (J.P. Morgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo, Goldman Sachs) withdrew from NZBA.

  • Reasons for Collapse

    • Mass Withdrawals: Began after the 2024 U.S. elections; Goldman Sachs, HSBC, Barclays, UBS, and several Wall Street firms exited.

    • Weakened Standards: To prevent further exits, NZBA dropped its 1.5°C alignment requirement earlier in 2025.

    • Criticism: Climate groups argued NZBA never truly challenged the fossil fuel–dependent models of banks.

    • Financing Gap: Since the Paris Agreement (2015), banks have financed $6.4 trillion in carbon-intensive projects vs. $4.3 trillion for green projects (Bloomberg data).

India’s Position

  • No Indian bank is a member of NZBA (as of 2025).

  • However, India has domestic frameworks like:

    • RBI’s Sustainable Finance Group (2021)

    • Sovereign Green Bonds issuance (since 2023)

    • SDG-aligned financing in GIFT City

Significance

  • Provides a global banking roadmap for decarbonisation.

  • Enhances climate accountability and disclosure.

  • Encourages private capital mobilisation towards green projects.

  • Acts as a counter to greenwashing by requiring measurable targets.

Criticism

  • Voluntary in nature → lacks enforcement.

  • Diverging regulatory environments (e.g., U.S. vs Europe) weaken uniformity.

  • Banks often accused of continuing fossil fuel financing despite commitments.

  • Developing countries (including India) underrepresented.



← Back to list