Concerns grow over banks’ climate commitments as GFANZ loosens mandate

A decision by the Glasgow Financial Alliance for Net Zero (GFANZ) to loosen its mandate has sparked renewed concerns that banks may be backtracking on their climate commitments.

GFANZ has announced that it will transition to a CEO-led group for all financial institutions working to mobilise capital for the global energy transition – effectively removing the strict joining criteria that pushed members to commit to science-based, Paris-aligned climate targets.

The move comes after several leading financial institutions decided to leave UN-backed initiatives within the GFANZ umbrella, including the Net Zero Banking Alliance (NZBA) and the Net Zero Asset Owners Alliance (NZAOA) – and has sparked renewed concerns over the level of climate ambition within the sector.

“GFANZ’s decision to walk back on a requirement to align with the Paris Agreement is a dangerous one, which could lead to its members lowering ambition even as climate change impacts like extreme weather are harming communities around the world,” said Jeanne Martin, Head of the Banking Programme at activist shareholder group ShareAction.

GFANZ drops joining criteria

The alliance was launched by COP26 president Mark Carney in 2021 to “accelerate the transition to net zero emissions by 2050 at the latest”, gathering 160 financial firms with US$70 trillion in assets – all of which had to commit to align their portfolio activities with the Paris Agreement.

For bank members of the NZBA, that also meant setting science-aligned interim targets every five years for themselves as well as the carbon-intensive sectors they finance, disclosing progress on emissions reduction and taking “a robust approach to the role of offsets in transition plans”.

While GFANZ itself has now dropped its membership criteria and allowed “any financial institution working to mobilise capital and lower the barriers to financing energy transition to participate”, no such announcement has been made by its member alliances, including NZBA, NZAOA and the Net Zero Insurance Alliance (NZIA).

US banks exiting NZBA en masse

On the last day of 2024, Citibank and Bank of America announced their departure from the Net Zero Banking Alliance, following the earlier exit by Goldman Sachs and Wells Fargo. Morgan Stanley joined them on January 2, meaning that five of the top six US banks – all but JP Morgan – have now left the alliance.

The exodus is seen as a reaction to the reelection of Donald Trump as US President, reviving fears of an anti-ESG backlash in the financial sector. But for NGO the Rainforest Action Network (RAN), it is a dangerous trend.

“America’s largest banks are making a new year’s resolution to turn back on their climate promises, disgracefully ending 2024 – a year marred by continued bank funding for fossil fuel expansion and policy backtracking,” RAN’s Bank Engagement and Policy Lead Allison Fajans-Turner said.

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She added that RAN and other climate finance NGOs sent a letter to NZBA and GFANZ urging them to call out defecting members, but were disappointed to see GFANZ “weaken itself” instead, “by clarifying its role as an advisory body rather than one that would hold its members to scientific standards.”