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The top global climate alliance for banks will ask members, including HSBC and Barclays, to vote on ditching the pledge to align their $54tn in assets with a Paris agreement aim to limit global warming to 1.5C.
The Net-Zero Banking Alliance’s effort to keep its remaining members follows an exodus of many leading US banks since the election of Donald Trump as president.
Many financial institutions that set net zero targets have backtracked, arguing they cannot decarbonise their lending and dealbooks any faster than the wider economy. The original ethos of the group, launched by then UN envoy Mark Carney, was to enable lower emission through financing activities.
Already under pressure from Republican politicians in the US, the group has lost 14 more top US members after Trump’s election, including JPMorgan Chase and the Bank of America, leaving it with 134 members. Only one bank has joined since early December, the Swedish SBAB, the alliance said.
A group of European banks that now make up its heaviest hitters had threatened earlier this year to pull out unless the NZBA softened its rules, the Financial Times has reported.
The proposal loosening the membership requirement was expected to be shared with members on Tuesday ahead of a voting process that will begin later this month, two people familiar with it said.
It was an “enormously depressing” reaction to the slow pace of the energy transition, one said.
The move follows two days of talks among its leadership in London late last month to plot the alliance’s future after months of consultation, a banker member said.
At present, the banks must commit to reducing carbon emissions linked to their financing to net zero by 2050, and to align with a global scenario in which the rise in the long-term average temperature is limited to 1.5C from pre-industrial levels.
Under the new proposal, the members would commit to aligning their activities with the less onerous goal to keep warming “well below 2C”, and to pursue efforts to keep it to 1.5C.
The world breached the 1.5C of warming last year for the first time, although this is not a breach of the Paris accord which is measured over more than two decades.
It heightened fears among scientists that climate change is accelerating even faster than expected. The UN has projected that the world is on track for 2.9C of warming by the end of the century.
The banking sector response is part of a wider shake-out of the financial sector alliances that gained momentum in 2021 under the umbrella of the Glasgow Financial Alliance for Net Zero (Gfanz) but came under political attack.
The similar asset managers’ alliance in January suspended its activities after heavyweight members including BlackRock quit, and an insurance industry alliance fell apart two years ago.
James Vaccaro, a senior associate at the Cambridge Institute for Sustainability Leadership, said the NZBA proposal was “a reflection of reality” for banks. It might make it easier for Asian banks that struggled to meet the rules to join, “enabling more momentum despite backtracking in North America”, he said.
Under the proposal, the group may focus more on helping members to build the technical expertise needed to publish carbon accounts and transition plans, as well as helping them engage on government policy on climate action.
Separately from the alliance, banks have been redrawing climate plans and reshuffled top executives. Morgan Stanley last year said its lending targets would reflect a world that warms by up to 1.7C, rather than 1.5C. HSBC has said it may reconsider its own financed emissions targets later this year, and Wells Fargo has dropped its goal to achieve net zero financed emissions by 2050.
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