Key Impact Points:
- NZBA drops strict 1.5°C alignment, now targets “well below 2°C” to retain members.
- 90% of members voted to relax targets, prompting exits like Triodos Bank.
- Critics warn shift undermines climate action as financial institutions prepare for a 3°C world
NZBA Relaxes Climate Target Requirements
The United Nations-backed Net-Zero Banking Alliance (NZBA) has officially lowered its climate ambition, scrapping the requirement for member banks to align with a strict 1.5°C warming scenario. New guidelines released April 15 now aim to keep warming “well below 2°C, striving for 1.5°C” in line with the Paris Agreement.
The shift follows the exit of six major U.S. banks — including Goldman Sachs, JPMorgan Chase, and Citigroup — and rising pressure from political and financial interests. Of the 80% of NZBA members who voted, 90% supported loosening the requirement.
“A Pragmatic Move” or a Retreat?
Net-Zero Banking Alliance Chair Shargiil Bashir of First Abu Dhabi Bank framed the change as realistic:
“The knowledge we had in 2021 on what was achievable…has been very different from where we are today.”
But the reaction has been sharply divided.
Triodos Bank, known for its ethical finance stance, announced its immediate departure:
“The shift from strict requirements to more lenient guidance significantly undermines the effectiveness of the Net-Zero Banking Alliance.”
Other financial institutions and watchdogs have echoed concern.
Reclaim Finance warned:
“The disturbing reality that the world is not on track for 1.5°C should not be taken as a reason to give up… but a flashing red light on the need to double down on efforts to cut emissions.”
Jeanne Martin of ShareAction emphasized the stakes:
“Every 0.1 of a degree matters… the greater the financial risks for banks and their investors.”
Disconnect from Science-Based Standards
The revised guidance puts Net-Zero Banking Alliance at odds with the Science Based Targets initiative (SBTi), which maintains 1.5°C as the standard in its Financial Institution Net-Zero Standard. In contrast, Net-Zero Banking Alliance now “encourages” rather than mandates this level of ambition.
While NZBA insists that targets should remain “science-based” and aligned with the Paris Agreement, critics argue that the update signals a weakening of climate leadership in the financial sector.
A Shift Toward Climate Adaptation?
Some analysts are calling the move “pragmatic.” A March report from Morningstar DBRS noted the change may lower transition costs by enabling a more “orderly” approach.
Yet others suggest it reflects a broader shift in mindset. Morgan Stanley, in a separate research note, stated:
“We now expect a 3°C world” — hinting that financial planning may be pivoting from mitigation to adaptation.
As banks retreat from firm climate commitments, investors and policymakers face a critical question: will financial institutions lead the transition, or merely prepare to profit from a warmer planet?
Related Article: Why Goldman Sachs Exits Net Zero Banking Alliance Following Asset Group’s Leaving of Climate 100
