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Offices of Barclays and HSBC, which have exited the Net-Zero Banking Alliance; photo credit: Jason Alden\/Bloomberg<\/p>\nInside the world\u2019s largest climate coalition for banks, there\u2019s speculation that an exodus led by Wall Street could be about to spread to the European Union.<\/p>\n
The Net-Zero Banking Alliance, an organization dedicated to decarbonizing global finance, may be facing defections by some large EU banks with sizeable US exposures, according to a person close to the matter who asked not to be identified discussing private deliberations. The risk of being accused in the US of having an anti-oil bias appears a key concern among the banks, the person said.<\/p>\n
EU exits from NZBA would mark a painful milestone for the group. In the US, where President Donald Trump\u2019s reelection has brought with it intensified political attacks on net zero policies, banks have had to navigate a landscape in which NZBA commitments have come with the risk of lawsuits and GOP blacklists. In the EU, meanwhile, net zero has been enshrined in law and the bloc\u2019s banks stand out as some of the world\u2019s most climate conscious.<\/p>\n
A spokesperson for NZBA said the alliance is committed to supporting its remaining members, without commenting on possible EU defections. This moment calls for \u201clong-term work that requires courage, consistency and true leadership to stay on track, even when faced with barriers to action,\u201d the person said.<\/p>\n
BNP Paribas SA, the EU\u2019s biggest bank by assets, was questioning the value of continued NZBA membership as recently as June, according to another person familiar with the matter who asked not to be identified discussing private conversations. The bank is reluctant to create headlines by leaving, however, and back in June discussed postponing a formal decision until around the end of the year, the person said. A spokesperson for BNP declined to comment.<\/p>\n
Deutsche Bank AG, Germany\u2019s largest lender, is \u201cmonitoring current developments and will assess them,\u201d according to a spokesperson, who added that the bank\u2019s own sustainability and net zero targets remain unchanged.<\/p>\n
A spokesperson for Spain\u2019s Banco Santander SA said it\u2019s still committed to net zero but declined to say whether that includes remaining an NZBA member.<\/p>\n
A UniCredit SpA spokesperson reiterated comments it made last month in connection with its earnings release, when the bank noted that it\u2019s an NZBA member with a net zero transition plan to support clients in their low-carbon transition.<\/p>\n
Commerzbank AG closely monitors \u201cmarket trends, regulatory developments and jurisdictions to ensure we can act appropriately if necessary,\u201d Beate Schlosser, a spokeswoman for the bank said by email. Commerzbank\u2019s 2050 net zero goal still holds, she said.<\/p>\n
Among reasons EU bank executives have given in the past for staying in NZBA was the access it gave them to other banks. But as defections continue, that access is no longer a selling point. Barclays Plc, which left earlier this month not long after UK peer HSBC Holdings Plc, said the string of walkouts means NZBA \u201cno longer has the membership to support our transition.\u201d<\/p>\n
Offices of Barclays and HSBC, which have exited the Net-Zero Banking Alliance; photo credit: Jason Alden\/Bloomberg<\/p>\n
Barclays\u2019 exit was promptly followed by UBS Group AG of Switzerland. Those departures, though all by banks in non-EU countries, have added to speculation that EU banks will be next, the person familiar with discussion inside NZBA said.<\/p>\n
The value of climate alliances such as NZBA remains a topic of debate. Lisa Sachs, head of Columbia University\u2019s Center on Sustainable Investment, said that a key weakness of frameworks like NZBA is the assumption that the finance industry can have a material impact on the low-carbon transition simply through setting targets to reduce emissions and committing to nudging portfolio companies to decarbonize.<\/p>\n
\u201cFinancial institutions are not the right institutions to fix market flaws or deliver societal transitions because their mandates are to maximize returns within existing market conditions,\u201d she said. \u201cAnd their assessments of risk are based on those parameters rather than on long-term societal risks.\u201d<\/p>\n
NZBA still has 125 members across the globe representing a combined $41 trillion in assets, according to its website. Banks in Northern Europe are among the most outspoken in their support, with ING Groep NV and ABN Amro Bank NV in the Netherlands, Swedbank AB and SEB AB in Sweden and Danske Bank A\/S in Denmark all underscoring their backing via spokespeople.<\/p>\n
The alliance was created to encourage banks to throw their weight behind the net zero transition. It initially required members to align their financing operations with the goal of limiting global warming to 1.5C. But after being virtually wiped off the North American map earlier this year, NZBA dropped that requirement and recast itself in more of a support role.<\/p>\n
It\u2019s a dramatic loss of stature for the alliance, which was created back in 2021 and feted by global bank executives at the COP26 climate summit in Scotland. Back then, when interest rates were at crisis lows and a global pandemic had created room for a green energy boom, net zero finance looked like a reliable path to commercial success. That narrative was reinforced when US President Joe Biden a year later signed the Inflation Reduction Act \u2014 the biggest piece of green legislation in US history.<\/p>\n
Ironically, NZBA is hemorrhaging members just as fossil-fuel finance appears to be in decline on Wall Street. Policies designed to push up supply and drive down prices have pummeled the oil sector, and analysts at JPMorgan Chase & Co. have said this moment may mark the first decline in global upstream oil and gas development spending since 2020.<\/p>\n
In all, financing provided to oil, gas and coal projects by Wall Street\u2019s top six banks fell 25% to $73 billion this year through Aug. 1 from the same period in 2024, according to data compiled by Bloomberg.<\/p>\n
\u201cA fundamental truth is that financial institutions follow markets \u2014 they don\u2019t create them,\u201d Sachs of Columbia University said.<\/p>\n