Most NZBA member banks have now set climate targets

A wide majority of banks expected to set sectoral decarbonisation targets or publish climate transition plans have now done so, according to the latest Net-Zero Banking Alliance (NZBA) progress report.

Now in its fourth year, the NZBA requires its 144 member banks to independently set targets for reducing emissions associated with their financing activities in carbon-intensive sectors such as energy and transportation within 18 months of joining.

As of May 2024, 97% of the 122 banks that were due to set these targets have done so.

Then, within 12 months of setting targets, they are required to publish a climate transition plan detailing how they plan to achieve these goals: 91 banks are currently in this phase, and nearly two-thirds of them have already published their transition plans, “with 25% more expected by year-end”, according to the NZBA.

Finally, they are expected to publish a full set of sectoral targets covering all or “a substantial majority” of the carbon-intensive sectors where they have material exposure within 36 months of joining the alliance. Around four-fifths of the 50 banks due to do so have published the full set of targets.

“These are visible signs of a transformative shift that has taken place over the past three years as banks position themselves to understand and finance the transition to net zero,” said Eric Usher, Head of UNEP FI, the convener of the Net-Zero Banking Alliance.

NZBA progress report highlights remaining gaps

However, the report also points to policy and data gaps preventing banks from setting ambitious climate targets, including the quality of clients’ greenhouse gas emissions data and a lack of supportive regulations.

Among banks that have not met the requirement to set targets covering most carbon-intensive sectors, almost all are from emerging markets, where the NZBA says “these challenges are particularly acute”.

As a result, the alliance plans to support emerging market banks towards meeting membership commitments, even if they need more time.

Updated NZBA guidelines and inclusion of capital market emissions

In March, NZBA members voted to update target setting guidelines, adding for the first time a requirement to include capital market emissions in targets by November 2025.

NZBA members include the likes of Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC, UBS and Westpac: all of them will now be required to set emissions reduction targets for their capital market activities, using the methodology created by the Partnership for Carbon Accounting Financials (PCAF) – or explain why they did not include them.

HSBC already did so in early 2024.