Launched in 2021, the alliance originally united more than 130 banks managing over $74 trillion in assets
The Net-Zero Banking Alliance (NZBA) was established over four years ago but has struggled to keep its members since the election of US President Donald Trump, who has referred to climate change as a “hoax.” This alliance, a key part of the broader Glasgow Financial Alliance for Net Zero (GFANZ) launched in 2021, originally united more than 130 banks managing over $74 trillion in assets. Its purpose was to push member banks to achieve net-zero greenhouse gas emissions across their lending and investment portfolios by 2050, with interim targets for 2030.
However, in 2023, the coalition faced significant disruption as major US banks like JP Morgan Chase, Citi, Morgan Stanley, and Bank of America pulled out due to political and legal issues. Following their exit, Canadian banks, which had substantial investments in fossil fuel financing, did the same. Shortly thereafter, European banks such as HSBC, Barclays, and UBS also withdrew, resulting in a weakened alliance. Importantly, the alliance has paused its activities amid the membership exodus and a vote on restructuring.
Factors behind exodus
Banks are withdrawing from the NZBA largely due to a combination of political, regulatory, economic, and legal pressures. This shift has been particularly influenced by the election of Trump, which led to changes in US policy that oppose climate action and ESG investing. In September 2024, a group of 23 Republican attorneys general launched inquiries into organizations such as the Science Based Targets initiative and CDP, warning that collective target-setting may illegally constrain market competition.
For banks that do business in conservative states, many of which also manage pension funds or municipal bonds, the risk of being penalized or even banned from procurement contracts is real. The political pressure has been relentless — since 2021, more than 480 anti-ESG bills and resolutions have been introduced across at least 42 US states, many targeting financial institutions that incorporate climate or social metrics into decision-making. If only a fraction of these become law, the uncertainty and legal costs associated with defending such positions are enough to drive banks to reconsider their membership in coordinated climate groups.
Additionally, the political environment has only added to the challenge. While the Biden administration initially supported climate disclosure rules and climate stress testing for banks, the Trump administration favours deregulation, fossil fuel development, and minimizing environmental or ESG mandates for financial institutions. In contrast, the European Union (EU) and the US state of California have moved in the opposite direction, introducing increasingly stringent rules like the EU’s Corporate Sustainability Reporting Directive (CSRD) and California’s climate disclosure laws. This divergence has created a regulatory patchwork, where multinational banks must comply with competing sets of disclosure and reporting obligations.
Another factor driving the withdrawals is concern over fiduciary optics and investor trust. Asset managers and owners had already shown signs of unease, with many leaving the Climate Action 100+ initiative in 2024 for fear of being accused of “acting in concert” on voting or capital allocation decisions. Banks, too, face the same perception risk. Fiduciary duty requires that lending and investment decisions be made in the best interest of clients and shareholders. Aligning too closely with collective roadmaps set outside their direct control could leave banks exposed to rising lawsuits claiming that they subordinated client interest to a political or environmental agenda.
Compliance burden
Despite their climate pledges, the world’s top banks have continued to funnel vast sums into fossil fuels. According to the 2025 Banking on Climate Chaos report, global fossil-fuel financing by the 65 largest banks rose to $869 billion in 2024 (with the US alone providing $289 billion). $162 billion was put up in 2024 alone.
However, banks themselves argue that without adequate government policies or client-level transition plans, it is unrealistic to meet net-zero portfolio goals by 2050.
The compliance burden itself has been another major challenge. Calculating “financed emissions” is no simple task because methodologies are still evolving, and requirements from alliances like NZBA often shift, creating moving goalposts. Banks have complained that they are asked to disclose and align with standards that are not universally accepted, creating reputational and operational risks if they fall short.
This does not mean all banks have abandoned net-zero commitment. Some smaller institutions, particularly niche players like Amalgamated Bank and Climate First Bank, have remained committed to the NZBA, arguing that aligning portfolios with net-zero is both feasible and commercially attractive. However, their combined balance sheets are tiny compared to Wall Street or European giants, limiting their influence over global capital flows. More recently, Deutsche Bank reaffirmed its commitment to net zero and achieving climate-related goals and net-zero ambitions.
The broader implications of this retreat are sobering. Exiting the NZBA does not reduce banks’ exposure to climate risk. Rather, it signals that resilience and transition planning are lower priorities.
According to a study, climate-related physical risks, like heat waves, floods, wildfires, and sea-level rise, are already creating material financial risks which could threaten collateral values and credit quality across entire sectors. In this context, central banks have long warned that ignoring climate risk could lead to mispricing, stranded assets, and sudden losses across lending portfolios.
From that perspective, the collapse of collective action mechanisms like NZBA may leave the financial system more vulnerable to systemic shocks. In conclusion, leaving the Net-Zero Banking Alliance isn’t just a story about banks stepping back from climate pledges, it’s a signal that the era of voluntary, symbolic alignment is ending.
The world’s biggest lenders are no longer willing to bind themselves to collective rules they can’t fully control, especially when legal threats, political uncertainty, and commercial realities collide. However, it doesn’t mean climate risk has vanished from their balance sheets. It means the pressure has shifted from coalition-driven promises to individually accountable action.
Every bank that walks away from NZBA now faces a sharper question: if they are no longer moving with the climate goals, how will they prove to regulators, investors, and society?
Going forward, the next phase won’t be measured in alliance memberships or glossy pledges. It will be measured in the capital they deploy, the emissions they actually finance, and the transition projects they make bankable. Those that can show real progress will shape the rules of sustainable finance on their own terms. The coming COP 30 will determine whether that shift strengthens or weakens global efforts to align capital flows with a net-zero world.
Anand Kumar is Assistant Professor in Finance, Queen’s University Belfast, Gift City Campus and Rajat Mehrotra is a PhD Researcher at BITS Pilani. Views expressed are personal.
About The Author
You may also like
India’s climate finance revolution: how financial institutions can transform with the new taxonomy
EU’s CBAM to Have Minor Impact on Indian Exports Initially: Report
Inside COP30 Circle of FM Report: A Path to the $1.3 Trillion Goal
Climate Governance Shows Progress, But Gaps Still Remain 10 yrs After Paris Agreement: Report
India’s GST overhaul eases path for India’s green growth