“Major US Banks Exit Net Zero Alliance: European Banks Must Lead the Way in Climate Action”

The recent departure of the six largest US banks from the UN’s Net Zero Banking Alliance (NZBA) has raised concerns about the commitment of financial institutions to combatting climate change. The move is seen as a preemptive gesture to appease the incoming Trump administration, which has shown skepticism towards climate action.

The question now is whether other banks will follow suit or if the remaining members of the NZBA will step up and push for more ambitious climate commitments. European banks, in particular, have expressed a desire for stronger guidelines within the alliance and now have an opportunity to lead the way in raising ambition.

The departure of the Wall Street banks from the NZBA is not entirely surprising, as some had threatened to leave two years ago due to pressure from red-state officials. The banks stayed on at that time after clarifications were made that the recommendations of the NZBA were not mandatory.

Another net-zero alliance representing major money managers has also suspended its activities, indicating a fear of retribution from the Trump administration and right-wing politicians at the state level. This highlights the challenges faced by financial firms in taking meaningful climate action.

Despite the exit of US banks from the NZBA, it is clear that many of these institutions have not shown a genuine interest in restricting fossil fuel finance. JPMorgan Chase, for example, provided significant financing to oil and gas companies in 2023, surpassing other banks in this regard.

In contrast, some European banks have taken steps to reduce their exposure to fossil fuels and align their financing with climate goals. French banks BNP Paribas and Crédit Agricole have committed to ending bond issuances for oil and gas companies, while Société Générale aims to cut its credit exposure to these sectors by 80% by 2030.

However, the NZBA itself does not mandate restrictions on financing for fossil fuels, and its target-setting requirements are not stringent enough to ensure real emission reductions. This has led to a variety of target types, some of which are flawed and unlikely to drive meaningful change.

European banks now have an opportunity to push for more ambition within the NZBA and strengthen their own climate commitments. The recent actions of US banks should serve as a wake-up call for financial institutions worldwide to take decisive steps towards aligning their operations with climate goals. Failure to do so could have severe consequences in the face of escalating climate impacts.