NZBA softens climate target requirements for members

The Net Zero Banking Alliance (NZBA) has lowered the level of climate ambition required from banks in order to join, from a 1.5ºC-aligned net zero goal to one “well below 2ºC”.

The amendment to NZBA’s rules comes after a large number of high-profile banks left the initiative following the election of Donald Trump as US President, and follows a year of consultations within the organisation.

The remaining 120+ members voted this week to adopt the proposed changes and renew NZBA’s mandate, marking a “new chapter” for the alliance – one focused more on member support than on standard-setting.

According to the organisation, allowing members banks to adopt net zero pathways aligned with the goal of limiting the temperature rise to well below 2ºC “increases flexibility for banks with exposures to a range of markets and sectors to manage targets and transition across their balance sheet, while still including the net-zero by 2050 low/or no overshoot 1.5°C pathways that many member banks already use, and which remain the guiding star”.

Uncertain future for capital market emissions

In March 2024, the alliance launched a new version of its target-setting guidelines that would have mandated members to include capital market emissions in their next rounds of net zero goals. It’s unclear whether this requirement will be maintained, given that NZBA is set to update its guidelines again to reflect the changes announced today.

“We are halfway through the critical decade for action on climate, and we need all sectors, including banking and finance, to commit to moving the needle on emissions reductions,” said Shargiil Bashir, NZBA Chair and Chief Sustainability Officer and Executive Vice President at First Abu Dhabi Bank. “As the largest global initiative specifically focused on supporting climate mitigation action by banks, NZBA is uniquely positioned to provide practical support to banks navigating the net-zero transition. I welcome the decision by members to progress NZBA into its new chapter.”

Changing the NZBA’s mandate will also mean a renewed focus on sectoral engagement to support banks to deepen client relationships and help them work with clients to advance policies to overcome constraints to sustainable growth and unlock green opportunities, the alliance explained.

NZBA achievements

Since its founding in 2021, the Net Zero Banking Alliance has made a mark in supporting the financial sector’s sustainable transition, including with its target-setting guidelines, which have helped over 100 banks set independent 1.5°C-aligned sector-specific climate targets for the first time.

In January, NZBA’s umbrella organisation, the UN-convened Glasgow Financial Alliance for Net Zero (GFANZ), also loosened its mandate, transitioning to a CEO-led group for all financial institutions working to mobilise capital for the global energy transition – a move that was criticised as “dangerous” by activist shareholder group ShareAction.