It is widely agreed that the 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change in Azerbaijan, informally dubbed the ‘finance COP’, was a failure. It did not ensure that developing countries secured a fair deal on climate finance. Barely three months later, six of the largest American banks, which are also deeply entangled in fossil fuel financing, have formally exited the UN-backed Net Zero Banking Alliance (NZBA).
As of January 6, 2025, Bank of America, Citigroup and Morgan Stanley have left the alliance. This follows the departure of Wells Fargo and Goldman Sachs in December 2024. Most recently, JP Morgan has also withdrawn from the alliance. Effectively, only three American banks remain: Amalgamated Bank, Areti Bank and Climate First Bank — but these do not hold nearly as much global influence as the larger banks that have exited.
The NZBA is a ‘bank-led, UN-convened’ group of leading banks from around the world committed to aligning their lending, investment and capital market activities with Net Zero greenhouse gas emissions by 2050, according to its website. Through collective knowledge-sharing, the frameworks developed by the NZBA aim to assist members in setting and achieving “credible science-based Net Zero targets for 2030 or sooner.”
More specifically, the alliance requires a commitment statement to be signed by bank CEOs as a precondition for membership. According to the NZBA website, one of the key commitments is to transition all operational and attributable greenhouse gas (GHG) emissions from their lending and investment portfolios to align with pathways to Net Zero by mid-century or earlier.
The GHG emissions covered in the commitment include Scope 1, 2 and 3 emissions, with Scope 3 requiring banks to account for all categories of their clients’ emissions “where significant and where data allow.”
In essence, the Net Zero plan is meant to cover both the banks’ own emissions and those of the entities they finance. Scope 1, 2 and 3 emissions (direct and indirect) of both the banks and their clients are to be included. However, the document specifies that ‘off-balance sheet activities’, such as assisting a client in issuing bonds for a particular activity, are not currently included but will be incorporated in the next iteration of commitments.
Launched ahead of COP26 in Glasgow under the UNEP Finance Initiative, the alliance boasts 136 members across 44 countries, with a collective asset base of $57 trillion. It was established at the same time as the better-known Glasgow Financial Alliance for Net Zero (GFANZ).
GFANZ is a growing group of private-sector entities aiming to foster collaboration in the financial services sector to support the objectives of the Paris Agreement — and the NZBA is one of several sectoral alliances under this umbrella. But climate campaigners have criticised this approach since its inception, questioning its effectiveness in delivering meaningful emissions reductions.
Statements suggest that the increasing exodus of major banks from climate alliances is linked to growing Republican opposition to ‘green’ and ESG (environmental, social and governance) policies in the US and is true for financial actors in general.
For example, members of another UN-linked climate coalition, the Net Zero Financial Service Providers Alliance, have come under Republican scrutiny in recent years, alleging that because the big players with enormous power are collectively advocating for strong Net Zero plans for their clients, they are ‘depriving disfavoured companies’ of economic opportunities and pressuring them to comply.
Republican senators argue that decisions on energy policy should be made by elected representatives, not corporate alliances. Moreover, they claim that commitments to Net Zero emissions by 2050 could “represent antitrust and consumer protection law violations.”
Similarly, BlackRock, Vanguard and State Street were sued by 11 Republican-led states late last year. The asset managers were accused of violating antitrust laws by engaging in ‘climate activism’ that allegedly reduced coal production and increased energy prices, according to news agency Reuters.
In the US, antitrust laws refer to legislation designed to prevent “anticompetitive conduct and mergers” to ensure a fair marketplace. However, Republicans interpret the collective alignment of financial institutions with Paris Agreement goals as a threat to carbon-intensive businesses, arguing that such group commitments could ‘starve fossil fuel-related companies of credit’ and other financial opportunities. Yet, the legality, premise and intent of these allegations have been hotly debated.
Other lawsuits and increased Republican-led scrutiny of ESG policies in the US are based on criticism that large financial institutions, by integrating climate considerations into their operations, are deprioritising their fundamental responsibility of ensuring high returns for investors.
With the return of known climate-denier Donald Trump to the White House, the urgency for major banks to shield themselves from political scrutiny appears to have intensified. However, despite all this movement, critics argue that the NZBA’s role in driving real climate impact is questionable at best.
It has been previously reported that American banks have largely obstructed the setting of higher climate finance and Net Zero targets compared to their European counterparts. They remained part of the NZBA and GFANZ after initially threatening to leave, only because the coalitions reiterated that their commitments were not mandatory — highlighting the limitations of voluntary pledges, particularly in climate action.
More importantly, data suggests that membership in the NZBA has not actually curtailed fossil fuel financing by US banks. In 2023, JPMorgan Chase provided $41 billion to oil, gas and coal companies, while Bank of America, Citigroup and Wells Fargo ranked among the top five global financiers of fossil fuels between 2016 and 2023.
Legal experts in the US have suggested that membership in the NZBA may have been little more than virtue signalling. With a new president in office, perhaps the banks’ strategy to appease critics — and avoid legal scrutiny — must shift gears accordingly.
It is interesting to note that none of the banks have provided concrete reasons for leaving the NZBA as yet and almost all have made statements underscoring their continued commitment to Net Zero emissions — just not through the alliance.
Other criticisms of NZBA have included the fact that a ‘Net Zero by 2050’ target is already outdated given the rapidly shrinking global carbon budget; that the commitments operate more as guidelines rather than enforceable standards; and that the alliance did not explicitly require banks to reduce fossil fuel financing in the first place.
Given these shortcomings, it may not be entirely accurate to consider the exits a major setback for global efforts to align finance with the Paris Agreement’s goals. Some of the world’s largest banks have now backtracked on their climate commitments , which were considered one step away from mere greenwashing by some.
Within the broader climate policy discourse, this development fits into the ongoing debate surrounding Article 2.1(c) of the Paris Agreement, which calls for “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.”
Arguably, the departure of these banks leaves one less space to hold facilitators of fossil fuel expansion accountable — a setback nonetheless. The tangible, long-term effects of these exits, however, remain to be seen.