Lucie Pinson is the founder and executive director of Paris-based NGO Reclaim Finance.
The abrupt exit of the six biggest US banks from the UN’s Net Zero Banking Alliance (NZBA) is a disturbing sign of the shallowness of these institutions’ professed commitment to acting on climate. It is also a sign of their willingness to preemptively show subservience to the incoming Trump administration.
The question now is whether other banks will follow the example of their US counterparts – especially given the rise of right-wing politicians in Europe and Canada who seek to halt action on climate – or if the remaining banks in the NZBA will now push for more ambition from the alliance, and strengthen their own climate commitments.
Some European bank officials have privately complained in the past that they would like the NZBA guidelines to be stronger but that US members were blocking progress. The European and other banks in the NZBA can now show that they were not just hiding behind the US banks’ obstructionist skirts, and act to increase the NZBA’s ambition.
The recent exodus of the Wall Street banks is hardly a surprise. At least some of them reportedly threatened to leave the NZBA two years ago when red-state officials threatened them with antitrust lawsuits. The banks stayed in then because the NZBA and the Glasgow Financial Alliance for Net Zero (GFANZ), an associated alliance for all types of financial institutions, both clarified that none of their recommendations were compulsory.
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The suspension of activities by another net-zero alliance representing big money managers is one more sign of financial firms’ fear of retribution from the Trump administration and emboldened right-wing politicians at the state level.
The Net Zero Asset Manager (NZAM) initiative’s requirements of its members were so weak as to be to mainly symbolic – and it shows how much fossil fuel companies are concerned about their continued access to capital that the politicians they fund will attack even the most milquetoast climate initiative from the finance sector.
Action with or without voluntary body
Regardless of their NZBA membership, the big US banks have never exhibited any real interest in restricting fossil fuel finance. JPMorgan Chase provided US$41 billion in finance for oil and gas and coal companies in 2023, billions more than any other bank. Citi, Bank of America and Wells Fargo were all in the top five global bankers of fossil fuels between 2016 and 2023.
In contrast, some of the largest European banks have shown that another path is possible.
While still falling short of the action required by science to stop fuelling climate change, particularly on LNG (liquefied natural gas), French giants BNP Paribas and Crédit Agricole have both committed to end the facilitation of bond issuances for oil and gas companies. Société Générale has a target to cut its credit exposure to oil and gas producers by 80% by 2030. These three banks have each more than halved their volumes of fossil fuel finance between 2020 and 2023. Additionally, Dutch bank ING will stop funding LNG projects after next year.
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Yet none of these robust measures and targets were due to the banks’ membership of the NZBA.
The NZBA does not require its members to restrict financing for oil, gas or coal – not even for those companies that are doing the most to expand fossil fuel production. Members are required to set targets for high-emitting sectors, but although the targets are recommended to be 1.5°C-aligned, the NZBA does nothing to ensure this.
No clear target-setting requirements
A lack of clear requirements on target-setting from the NZBA means that its members have a bewildering array of target types, many of which are deeply flawed and unlikely to lead to real-world emission reductions. The most problematic targets are those based on “financed emissions”.
This methodology attributes the emissions from corporations to their banks using a formula that divides lending exposure by corporate value. The resulting number changes as the market value of the companies in a bank’s sectoral portfolio rises, so the bank’s financed emissions for that sector will fall even if real emissions stay the same.
French bank BPCE, like most other major European banks such as HSBC, Deutsche Bank or UBS, has set only a financed emissions target for the oil and gas sector - in sharp contrast to the banks mentioned above that have set targets to reduce their lending to oil and gas companies.
Provided oil and gas company share prices rise sufficiently, BPCE could meet its target without reducing its finance to these companies, and without these companies cutting their emissions – as Barclays did in 2023, seven years ahead of the target year.
European banks must push NZBA for more ambition
Given their mixed track record so far, it is also possible that European banks could use the US exodus as an excuse to backtrack on their climate commitments, and even for pushing back on recently adopted related regulations. BPCE’s “Vision 2030”, published in June last year, is one example of an important European bank moving backwards on climate.
Some EU business groups have successfully lobbied to reopen key Green Deal legislation. And while we do not yet know how far the changes will go, some banks may join their push to go beyond mere clarifications and simplifications, and dismantle new reporting and due diligence obligations.
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The last of the US banks to announce they were quitting the NZBA was JPMorgan Chase. Their announcement was made on January 7 — the very same day that the catastrophic fires broke out in Los Angeles.
Wall Street may escape the wrath of Trump by appearing not to care about climate change, but financial institutions will not escape the wrath of climate change unless they show the courage to stop financing the expansion of fossil fuels.