The Net Zero Banking Alliance (NZBA), a flagship initiative under the Glasgow Financial Alliance for Net Zero (GFANZ), is facing a credibility crisis. Initially launched with the bold goal of aligning the banking sector with the 1.5°C target of the Paris Agreement, the alliance has recently relaxed its ambition, now aiming merely to keep global temperature rise "well below 2°C." This move comes amid high-profile exits from major U.S. banks and growing political pressures, raising concerns about the financial sector’s true commitment to climate action.
Major Bank Withdrawals Signal Recalibration
In early 2025, five major U.S. banks, including JPMorgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley, quietly withdrew from the NZBA. Together, their departure slashed the alliance's total assets by 22%, casting doubt on its collective impact. These institutions cited operational and regional complexities, saying a uniform global strategy was increasingly unworkable. However, critics view the withdrawals as part of a broader retreat from climate leadership, particularly as political winds shift in the U.S.
Ethical Banks Push Back
Not all members are backing away. Dutch ethical lender Triodos Bank exited the NZBA not because it opposed the ambitious goals, but because the alliance was no longer ambitious enough. The bank reaffirmed its science-based commitment to cutting emissions by 42% by 2030 and condemned the revised targets as a watering down of climate action. Triodos' stance reflects the frustration of smaller, sustainability-focused institutions that fear losing ground in the face of regulatory and political compromises.
Political Pressures and Regulatory Gaps
This shift in banking commitments comes against a backdrop of increased political scrutiny. In the U.S., Democratic lawmakers have openly criticized the banks' decisions to leave the NZBA. They have requested greater transparency regarding these exits and demanded disclosure of any correspondence with the Trump campaign, suggesting fears that ESG rollbacks may be politically motivated. Without regulatory consistency, banks face a fragmented landscape that makes sustained climate progress difficult.
The Case for Stronger Oversight
While some institutions like Standard Chartered remain committed and continue to develop detailed transition plans, the broader trend points to a gap between voluntary climate commitments and actionable progress. Experts warn that relying solely on market incentives is insufficient. A lack of standardized frameworks and enforcement mechanisms risks undermining years of ESG progress. As global climate targets grow more urgent, financial regulators may need to step in to hold institutions accountable.
Conclusion: A Critical Juncture for Financial Climate Leadership
The evolving posture of the NZBA is emblematic of a larger challenge: balancing climate ambition with operational and political realities. While flexibility may be necessary, it must not come at the expense of credibility. The next phase of climate finance will depend on whether banks can remain both profitable and purposeful, or whether regulation will need to compel them to do so.
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