The global banking industry is moving away from climate initiatives as major financial institutions withdraw from what was once the gold standard for climate action in banking. The Net-Zero Banking Alliance (NZBA), formed in 2021 by former Bank of Canada Governor Mark Carney, has paused all activities while its members vote on restructuring the organisation’s climate action strategy.

When the NZBA was launched, it was a watershed moment for sustainable finance as more than 100 banks pledged to align their lending and investment portfolios with net-zero emissions by 2050. However, four years later, that vision has fallen apart. The alliance has lost 18 members between October 2024 and July 2025 alone.

This exodus has forced the leadership into crisis mode, prompting what many see as an attempt to salvage something from the remains of banking’s climate ambitions.

The domino effect of departures

The exodus from the NZBA started in late 2024 when Goldman Sachs announced its departure in December. After this, major Wall Street banks like JPMorgan Chase, Bank of America, Morgan Stanley, Citigroup, and Wells Fargo also left NZBA within weeks.

Canada’s six largest banks also withdrew their support in early 2025. This left the alliance struggling to stay relevant.

In April 2025, the alliance revised its framework by removing the mandatory requirement for banks to align their lending and capital markets activities with the goal of limiting global warming to 1.5°C. This halted the departures for a while, until high-profile resumed it this summer. HSBC left the group in July, followed by UBS and Barclays in August.

The domino effect may not be over. Several European Union banks are reportedly re-evaluating their NZBA memberships, including BNP Paribas SA (the EU’s largest bank by assets), Deutsche Bank AG, Banco Santander SA, UniCredit SpA, and Commerzbank AG. If any of these banks exit, it would mark the first EU-based withdrawals from NZBA, considered a significant blow to the group’s credibility.

What is NZBA’s new proposal?

On 27th August, the NZBA Steering Group started a member-wide vote that could change the alliance’s structure and purpose. The proposal would alter the nature of the initiative, moving from a membership-based alliance with specific commitments to establishing its guidance as a new framework initiative that banks could reference without formal membership obligations.

This proposed restructuring waters down the alliance’s original vision and power, as the new approach would merely offer voluntary guidance and best practices. The alliance has defended the proposal as “the most appropriate model to continue supporting banks across the globe to remain resilient and accelerate the real economy transition in line with the Paris Agreement.”

The voting will be done by the end of September 2025. The results are expected shortly after.

What are the broader implications for climate finance?

The NZBA’s crisis highlights a wider collapse of climate initiatives in the financial sector. This alliance is part of a larger group of climate-focused financial coalitions that have been under increasing political pressure recently. The rise in departures followed the 2024 US presidential election and subsequent policy shifts. The current administration’s rollback of climate regulations and resistance to ESG initiatives have made it difficult for these coalitions to operate effectively.

Banks faced pressure from Republican politicians in the U.S. who threatened them with legal action for joining climate-focused alliances and indicated that companies involved could be excluded from state business. This was part of a wider anti-ESG political campaign.

As a result, banks find themselves caught between competing priorities, maintaining public climate commitments while navigating an antagonistic regulatory environment.

This has also impacted climate protection collisions negatively, or has influenced their decision-making. The Net Zero Asset Managers initiative (NZAM), launched in December 2020 to coordinate investor climate action, announced a review of its activities in January after BlackRock and other major asset managers withdrew.

Other coalitions included the Net Zero Asset Owner Alliance (NZAOA) and the Net-Zero Insurance Alliance (NZIA). After several high-profile departures from each group, the NZIA was discontinued in 2024, while NZAM announced earlier this year that it will suspend its primary activities, as it moves to adapt to a changing political and regulatory environment.

The UN-backed Glasgow Financial Alliance for Net Zero (GFANZ), which had acted as an umbrella group for the coalitions, also launched a significant restructuring this year, shifting its focus towards initiatives enabling the mass mobilisation of capital to support the low-carbon transition.

Looking ahead

While the NZBA is shifting from a membership organisation with specific commitments to a voluntary guidance framework, this approach is questionable, as without accountability or clear commitments, it risks becoming a greenwashing platform, allowing banks to continue financing fossil fuel expansion.

The results of next month’s vote will determine whether banking’s climate ambitions can be salvaged or whether the sector has chosen short-term interests over long-term planetary stability.