Washington/Beijing/London A landmark climate finance initiative once seen as the banking sector’s commitment to tackling global warming has officially disbanded, following a sweeping U.S. policy shift and mass withdrawals by some of the world’s largest financial institutions.
A Climate Alliance in Retreat
The Net-Zero Banking Alliance (NZBA), launched in 2021 under the United Nations Environment Programme, confirmed that it has ceased operations after a member vote. The group, which once counted over 130 banks representing more than 40% of global banking assets, was designed to align lending and investment portfolios with the Paris Agreement’s 1.5 °C pathway.
But after months of turmoil, the alliance collapsed. Member banks from the U.S., Europe, Canada, and Asia including JPMorgan Chase, Citigroup, Bank of America, HSBC, and Barclays had already pulled out, citing political pressure, regulatory risks, and concerns over competitiveness.
U.S. Policy Shift Sparks Departures
The turning point came after President Trump returned to office, reversing federal climate policies and championing fossil fuel development. Facing lawsuits and heightened political scrutiny, U.S. banks began exiting the alliance, weakening its credibility.
“The political and legal risks became impossible to ignore,” one senior U.S. banking executive said. “Without bipartisan support at home, global commitments were no longer sustainable.”
By mid-year, even European and Asian members began reconsidering their roles, worried about being at a competitive disadvantage if American rivals were no longer bound by climate restrictions.
From Bold Commitments to Diluted Goals
Earlier this year, the NZBA revised its charter, watering down its earlier pledge to phase out financing of high-carbon industries. Instead of mandatory 1.5 °C alignment, banks were given “flexibility” in setting their own climate goals.
The changes, meant to keep members onboard, only accelerated the exodus. By September, with its most influential players gone, the alliance had little choice but to vote itself out of existence.
Guidance to Remain, But Oversight Ends
In its final statement, the NZBA said it would leave its guidance documents and target-setting tools publicly available, but would no longer function as a member-based organization.
Climate advocates warn this effectively removes one of the few accountability mechanisms in global banking. “Voluntary alliances are fragile without regulatory backing,” said one environmental campaigner. “This collapse shows that when politics shifts, corporate climate promises vanish.”
Shockwaves in Climate Finance
Markets have reacted cautiously. Green bond issuances and sustainability-linked loans are still growing, but analysts note the collapse of the NZBA could erode confidence in voluntary carbon-reduction pledges.
Environmental groups labeled the move a “historic setback,” while business associations said it reflects the reality that banks cannot bear the costs of climate transition alone without consistent government policy.
What Comes Next
The fall of the NZBA raises critical questions about the future of climate finance. Some expect regulators, particularly in Europe, to impose stricter mandatory climate disclosures and capital rules. Others predict investors will take the lead, pressuring banks through shareholder activism.
For now, the world’s largest banks face fewer collective restrictions on financing fossil fuels, a development that climate scientists warn could jeopardize global efforts to slow warming.
As one analyst summed up: “The disbanding of this alliance is not just a banking story, it’s a signal that voluntary cooperation in climate finance may not survive when politics and profit collide.”
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