Starting in 2021, 144 banks worldwide signed a collective commitment to align their lending and investment portfolios, worth over $74T USD, with net-zero emissions by 20501. Three short years later, 11 major banks in the US and Canada have pulled out. How does this exodus impact climate action progress?
Citing political and regulatory pressure, which have yet to come to bear, BMO; CIBC; TD; Scotiabank; National Bank; Goldman Sachs; Morgan Stanley; Wells Fargo; Bank of America; Citigroup; and JPMorgan Chase, preemptively withdrew from the Net Zero Banking Alliance (NZBA) in January 2025. Collectively they represented 25% of the world’s banking assets directed towards climate action2.
While many of the banks claim that this doesn’t impact their commitments to net zero, pulling out of the Net Zero Banking Alliance removes a layer of accountability. With no further requirements for public reporting or the need to align to industry best practice, these banks aren’t compelled to reevaluate relationships with high-emission clients or increase support for sustainable projects.
Given the influence of the capital in our society, this withdrawal can have far-reaching consequences for global efforts to address climate change. Here are five potential outcomes:
- Relaxed timelines and compliance standards: Banks may adopt more flexible approaches to achieving net-zero goals, potentially leading to less urgent action on emissions reduction, which could slow the transition to a low-carbon economy.
- Continued financing of high-emission clients: Banks may have less pressure to restrict funding for carbon-intensive projects, also slowing the transition to a low-carbon economy.
- Reduced support for low-carbon initiatives: Banks might offer less favorable terms or fewer specialized products for sustainable projects, potentially hindering the growth of green industries.
- Reduced pressure on clients to transition: Banks may exert less influence on their clients to adopt low-carbon practices or set their own emissions reduction targets.
- Decreased demand for voluntary carbon markets: The slowdown to transition towards low-carbon investment or lending could reduce the demand for carbon credits from clients and hinder the growth of voluntary carbon markets, which were projected to reach $15-30 billion by 20303.
The withdrawal of major North American banks from the Net Zero Banking Alliance underscores the complex interplay between public sentiment, political pressure, and corporate climate action. This development highlights the need for more voices to contribute to corporate strategy and opens a crucial dialogue about the future of sustainable finance. As the financial sector navigates these challenges, the critical question remains: How can we maintain momentum in climate finance despite these setbacks?