What is Net-Zero Banking Alliance?
The Net-Zero Banking Alliance (NZBA) was established in April 2021 with 43 member banks and has since tripled to over 120 members across 40 countries [1]. Since its inception, members have made significant contributions to the creation of the internationally recognised “Guidance for Climate Target Setting for Banks” in achieving net-zero greenhouse gas emissions goals in alignment with the Paris Agreement [2].
The members have also provided innovative guidance and analysis to support banks in meeting the demands from regulators, investors, and civil society for transparent and credible climate disclosures. As of April 2024, over one hundred banks had initiated individual, independent, sector-specific climate targets supported by this guidance. Many continue to develop and implement transition plans [3]. However, starting December 2024, several banks exited the Net Zero Banking Alliance.
Departure from the Net Zero Banking Alliance: A Timeline
The exodus from NZBA started on 6 December 2024, with Goldman Sachs becoming the first significant US bank to withdraw. Two weeks later, Wells Fargo followed. Subsequently, Citigroup and Bank of America declared their withdrawal on 31 December. The most recent departure in the US was Morgan Stanley, which happened on January 2 [4].
This was followed by the exit from five of the largest Canadian banks, namely TD Bank, Bank of Montreal, National Bank of Canada, Canadian Imperial Bank of Commerce and Scotiabank [5]. Furthermore, five out of six Japanese banks have left the alliance, with Mizuho Financial Group being the most recent to leave along with the exit of Australian infrastructure financier Macquarie [6,7].
Mounting Political Pressure and Legal Risks
The banks in the United States left the Alliance under mounting political and legal pressure from the US Republican Party, who have framed ESG investing as a veiled attempt to boycott fossil fuel industries [8]. Last year, BlackRock, Vanguard, and State Street were sued by Texas and 10 other Republican-led states, which said the large asset managers violated antitrust law through climate activism that reduced coal production and boosted energy prices [9].
The regulatory scrutiny has created legal risks for continued participation, and the departure is part of a broader pattern of “anticipatory obedience”, where companies are preemptively distancing themselves from politically charged climate commitments as a result of President Donald Trump’s return to the White House. [10] The final nail in the coffin may have been the expansion of NZBA’s scope to capital markets.
Further, on 27 March 2025, the U.S. Securities and Exchange Commission (SEC) formally withdrew its defence of the Greenhouse Gas Disclosure Rule, which had been a cornerstone of climate-related financial transparency under the Biden administration [11].
The Implications for GFANZ
The broader Glasgow Financial Alliance for Net Zero (GFANZ) structure is significantly affected. Alongside the Net-Zero Asset Owner Alliance (NZAOA) and the Net-Zero Insurance Alliance (NZIA), the NZBA was one of its most formidable branches. The latter has already experienced attrition, as by mid-2023, numerous insurance titans had withdrawn, citing comparable antitrust concerns [12]. Now that the banking sector has retreated en masse, the credibility of the NZBA is in question.
GFANZ’s collective influence is diminished by the loss of these major banks, which are among the largest global financiers, despite the fact that the Alliance is not legally binding and operates through voluntary commitments. The implications of this retreat are not limited to internal governance, as it may also impact global confidence in private finance as a means to address climate change [13].
Future of the NZBA and Private Climate Finance
The NZBA still continues to include major European and Asian institutions, and some institutions that have departed continue to assert that they will independently pursue net-zero strategies. However, it is certain that transition finance is at risk of becoming a race to the bottom, characterised by political pressures, minimal transparency, and vague targets [14].
In April 2025, the NZBA declared that it would reevaluate its priorities in response to evolving external circumstances. It further announced a series of significant changes to its framework and principles for members, including eliminating a mandatory requirement for banks to align lending and capital markets activities with the goal of limiting global warming to 1.5°C. It remains to be determined whether this results in a diminished level of ambition or a redoubled effort to fortify commitment [15].
However, these changes prompted Dutch ethical bank Triodos to leave the NZBA, saying “The new guidelines fall short of the needed urgency to align loans and investment portfolios with the 1.5 degrees Celsius global warming scenario,” and that a lot of what has been achieved is being watered down by the changes [16]. What is evident, however, is that climate leadership in finance cannot be sustained solely through voluntary alliances. It necessitates political stability, international coherence, and facilitating regulation.
Further, the departures from the NZBA occur at a critical juncture. The New Collective Quantified Goal (NCQG) adopted by countries at COP29 in Baku is a new climate finance objective that is anticipated to replace the original $100 billion annual commitment by developed countries with a $300 billion annual commitment, until 2035. Private capital plays a critical role in bridging the climate finance divide, particularly in the Global South, through the NCQG [17].
Conclusion
The credibility of voluntary climate finance initiatives is called into doubt by the withdrawal of major banks from the NZBA. The reliance on non-binding alliances is becoming increasingly untenable as legal risks and political backlash escalate. For private finance to continue to be a critical component of the global climate change response, robust, enforceable regulatory frameworks that protect climate action from political shifts may be required. The NZBA’s unravelling may signal that the era of voluntary climate commitments should be replaced by politically resilient, accountable, and mandatory mechanisms that can sustain climate-aligned banking in volatile environments [18].
