European Banks and NZBA

January 21, 2025

Recent developments have seen European banks reassessing their membership in the Net Zero Banking Alliance (NZBA). This follows a wave of withdrawals by major US banks, leading to concerns over climate collaboration and potential legal ramifications. Executives are now contemplating their positions in light of these challenges.

What is the Net Zero Banking Alliance?

The NZBA is a UN-convened initiative. It comprises global financial institutions committed to achieving net-zero greenhouse gas emissions by 2050. Established nearly four years ago, it aims to align banks with global net zero targets. The alliance operates under the UN Environment Programme Finance Initiative’s Principles for Responsible Banking.

Membership and Climate Targets

Banks joining the NZBA commit to setting emissions reduction targets. They must publicly share these targets within 18 months and develop detailed transition plans within 12 months. Members are also required to publish sectoral targets for carbon-intensive sectors within 36 months.

Recent Withdrawals by Major Banks

JPMorgan, Citigroup, and Goldman Sachs have recently exited the NZBA. This trend has raised alarms among European banks, prompting them to consider similar actions. Canadian banks have also followed suit, creating a ripple effect in the alliance.

US Political Climate and Legal Challenges

Right-wing politicians in the US have intensified their scrutiny of corporate climate policies. Allegations of collusion against banks blocking financing for oil and gas companies have emerged. This has led US banks to distance themselves from climate collaborations due to fears of antitrust issues.

European Banks’ Concerns

European banks are caught between legal challenges in the US and their environmental commitments. Recent updates to NZBA’s guidelines require banks with capital market activities to include emissions from these operations in their targets, adding to their concerns.

Gfanz’s Reassessment

The Glasgow Financial Alliance for Net Zero (Gfanz) is re-evaluating its role amid increasing political and legal pressures. The Net Zero Asset Managers initiative has ceased tracking its membership criteria, indicating broader uncertainty within climate-focused alliances.

Future Meetings and Uncertainties

Efforts to convene a Gfanz meeting have faced hurdles due to scheduling conflicts and political distractions. The group aims to meet in February to discuss the future of climate collaboration. Despite achieving initial goals, the ongoing political and legal pressures pose challenges ahead.

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