In what is the latest move to backtrack on a net-zero commitment, the Net Zero Banking Alliance (NZBA) has abandoned its requirement for banks to align their lending portfolios with a 1.5oC commitment – part of the Paris Agreement.
NZBA took the unusual step of asking members to vote on a measure to “acknowledge a wider range of net-zero pathways” rather than stick to the 1.5oC commitment. Members, the alliance said, voted in favour on this wider approach, thereby abandoning a central commitment of the group.
The decision has made Dutch bank Triodos the latest bank to walk away from the alliance.
This comes after big hitting US banks JP Morgan Chase, Goldman Sachs, Wells Fargo, Citigroup, Bank of America and Morgan Stanley departed the group since late last year.
Reacting to the decision, Jeanne Martin, co-director of corporate engagement at Share Action, said the responsible investor pressure group was “deeply disappointed” that “major banks have pushed the NZBA to water down its guidelines on 1.5 oC and climate targets.”
The decision adds further risk to investors. “Every 0.1 of a degree matters and the higher global temperatures get, the harder it will be to deal with these impacts, and the greater the financial risks for banks and their investors,” Martin added.
“Instead of using their vast resources to weaken standards, banks should be directing them to achieve their climate goals and protect their long-term financial interests.”
Martin said asset owners and other investors have an opportunity and responsibility to push back on this.
“Responsible investors must double down on pressure to hold banks accountable to their climate commitments and urge them to play their part in fast tracking the transition rather than delaying progress,” she said.
Shai Hill, chief executive of data provider Integrum ESG, noted a worrying trend: “All the net-zero alliances under the Glasgow Financial Alliance for Net Zero umbrella are crumbling,” he said.
He then cited the changing legal landscape in the US as a catalyst. “The main reason is that the multi-national financial institutions within the alliances have become deeply scared of being pursued for acting in concert, against US energy interests, by the US House Committee on the Judiciary,” he said.
Events seem to have snowballed after Texas attorney general Ken Paxton sued Blackrock, State Street and Vanguard for what was described as “conspiring to artificially constrict the market for coal through anticompetitive trade practice”, in November last year due to their net-zero commitment and plans to phase out coal investments.
This has then spiraled politically, as highlighted by Hill, and had major implications for investors and banks.
Although Hill added: “I am just surprised the NZ Banking Alliance has not suspended its activities in the same way that the NZ Asset Managers Alliance did in January. Once any NZ Alliance says that aligning to the Paris Agreement is unnecessary, no one is going to regard it with anything other than derision.”
The NZBA had, until recently, been playing an important role in getting banks from across the globe to commit to net-zero by 2050 and set decarbonisation targets to support their long-term ambitions.
With its latest move, the NZBA is undoing all that work, and rowing in the opposite direction.
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