Global banking giants exit climate alliance as political pressure intensifies on net-zero initiatives
The climate alliance that once represented the banking sector’s most ambitious environmental commitment is crumbling under political pressure. HSBC announced its withdrawal from the Net-Zero Banking Alliance in July 2024, becoming the first major UK bank to exit the UN-backed coalition, marking the latest chapter in an exodus that is slowing global climate finance initiatives.
Understanding the climate alliance under siege
TheNet-Zero Banking Alliance (NZBA)is a global member-led initiative supporting banks to lead on climate mitigation in line with the goals of the Paris Agreement. Founded in 2021, the NZBA is a group of global banks who were committed to aligning their lending, investment, and capital markets activities with net-zero greenhouse gas emissions by 2050.
NZBA membership tripled in number since the Alliance launched in April 2021 and remains open to all banks, but recent departures have dramatically reduced its influence. 127 banks from 44 countries representing US$44 trillion in total assets now remain in the climate alliance, down from its peak of over 140 members.
When banks join the climate alliance, they commit to specific targets and disclosure requirements. Member banks and their chief executives pledge to align lending and investment portfolios to achieve net zero by 2050. Inside 18 months of signing, they are required to set targets for 2030 and 2050, along with intermediary goals at five-year intervals.
The great American banking exodus
The most dramatic departure from the climate alliance began in December 2024. Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo all announced that they would be leaving the coalition in December 2024 and early January, in a reversal of American participation in the climate alliance.
Only three US banks now remain in the NZBA: Amalgamated Bank, Areti Bank, and Climate First Bank, none of which hold the same global influence as their larger counterparts.
The ripple effects extended beyond US borders. In late January, a number of Canadian banks followed their US counterparts. Five of the country’s top banks – TD Bank, Bank of Montreal, National Bank of Canada, Canadian Imperial Bank of Commerce, and Scotiabank – also left the alliance.
Asian and UK banks follow suit
Japanese banks have followed the US and Canada in leaving the Net Zero Banking Alliance. Mizuho Financial Group is the latest Japanese bank to withdraw from the NZBA, meaning five out of six Japanese banks in the alliance have left.
“HSBC has decided to withdraw from the Net Zero Banking Alliance. We continue to support customers to make progress towards their decarbonisation plans,” the UK bank stated in July 2025.
Republican legal warfare against climate finance
The primary force behind the climate alliance exodus has been sustained legal and political pressure from Republican officials in the US. On October 19, 2022, 19 Republican state attorneys general (AGs) launched a coordinated investigation by issuing civil investigative demands (CIDs) to six major US banks.
According to several AGs leading the investigation, the NZBA is a “massive worldwide agreement” among member banks who “must” set greenhouse gas emission reduction targets in their lending and investment portfolios to reach net zero emissions by 2050.
The AGs allege the banks are “ceding authority to a foreign body” – the United Nations – and “starving” US companies engaged in fossil-fuel related activities of credit. Texas Attorney General Ken Paxton emerged as the most aggressive opponent of the climate alliance.
Paxton said he will end his ongoing probe of major US-based banks and allow them to conduct business in the Lone Star State following their recent departures from the NZBA. The Republican campaign included concrete financial penalties.
UK-based bank Barclays was banned in Texas from participating in the state’s municipal bond market over its ESG policies after the bank failed to respond to inquiries about its climate commitments. Secret audio obtained by Rolling Stone revealed how Texas officials systematically pressured financial institutions.
A top deputy to Attorney General Paxton explained to conservative operatives how his office “bullied Wells Fargo” by threatening to cut off lucrative state bond business until the bank abandoned its climate commitments.
Climate alliance weakens under pressure
Facing mounting pressure, the climate alliance has weakened its requirements. The NZBA released revised guidelines for members, significantly softening the language from its 2024 guidelines, which had included a series of mandatory requirements for banks.
Among the most notable changes, the 2024 guideline stated that “banks shall set a 2050 target to support meeting a 1.5°C by end of century outcome and a net-zero by 2050 goal,” with an explanation that this was “mandatory, on a comply-or-explain basis,” while the updated document includes a “recommendation” that states that “banks should set a 2050 target to support meeting a net-zero goal and the goals of the Paris Agreement.”
European banks under growing pressure
While European banks have largely remained in the climate alliance, cracks are appearing. Several European institutions are privately reconsidering their membership amid concerns about US antitrust exposure and political backlash.
Slawomir Krupa, chief executive of Société Générale, publicly stated the French bank is “not planning to leave,” while Credit Agricole’s CEO Philippe Brassac reaffirmed commitment to remaining in the alliance. However, sources suggest European lenders are demanding the alliance ease rules and end formal tracking and any issues perceived contrary to US antitrust regulations.
Limited impact despite ambitious goals
Critics have questioned the effectiveness of the climate alliance since its inception. A consistent lack of action from member banks puts the US mass exodus into perspective. Their exit does little to change the material reality of banks’ climate commitments – or lack thereof.
However, some data suggests the climate alliance did influence lending patterns. Though the NZBA’s efficacy in effectively reducing greenhouse gas emissions is still questionable, empirically, the alliance reduced lending by 20% to sectors like oil and gas, power generation, auto manufacturing, and shipping.
Three European banks – Société Générale, BNP Paribas, and Crédit Agricole – more than halved their fossil fuel financing between 2020 and 2023. None of the policies or changes that resulted in these cuts came as a direct result of their NZBA membership.
Global climate finance implications
The departures from the climate alliance have significant implications for developing countries. As of the second quarter of 2024, the total assets of the 145 members of the NZBA were $71.58 trillion, and the US banks that left the alliance comprised almost 20 percent of those assets, or $14.29 trillion.
Without the participation of US banks in the NZBA, the already limited pool of climate-friendly finance may shrink further, potentially increasing borrowing costs. This will concern the economies of Vietnam, Indonesia, the Philippines, Thailand, and Malaysia, which are seeking investments and loans to build climate-resilient infrastructure.
Industry and environmental response
Environmental groups have condemned the departures from the climate alliance. Following HSBC’s announcement of its departure from the NZBA, Jeanne Martin, ShareAction’s Co-Director of Corporate Engagement, said: “We strongly condemn HSBC’s decision to leave the NZBA, which is yet another troubling signal around the bank’s commitment to addressing the climate crisis.”
Ben Cushing, campaign director at the Sierra Club, said financial institutions need to phase out their fossil fuel investments to meet their net-zero goals, and while the NZBA plays an important role, what matters is the policies companies set.
The broader anti-ESG movement
The climate alliance exodus is part of a broader Republican campaign against environmental, social, and governance (ESG) investing. In November 2024, BlackRock, Vanguard, and State Street − among the largest US investment firms − were sued by eleven states governed by Republicans, including Texas, Iowa, Alabama, and Nebraska.
The lawsuit alleged violations of antitrust laws, claiming that the companies’ support for climate initiatives had resulted in reduced coal production and higher energy prices for consumers.
Future of climate finance alliances
The departure of US financial institutions from the Net Zero Banking Alliance and other net-zero commitment groups raises questions about the effectiveness of volunteer groups and whether mandatory measures are needed to ensure countries reach climate goals.
Some observers see opportunity in the departures. Triodos, an ethical bank based in the Netherlands, is one of the more progressive NZBA members. It has long been calling for the coalition to be more ambitious with its commitments. The ethical bank views the exodus as an opportunity for the remaining members to do more, now that they are not being held back by their American counterparts.
The end of voluntary climate action?
What began as the banking sector’s most ambitious environmental initiative has been systematically dismantled by coordinated political pressure, revealing the fragility of voluntary climate commitments in an era of extremes in politics.
The remaining 127 banks now face a choice between abandoning the weakened alliance entirely or using the departure of reluctant members as an opportunity to finally implement the ambitious climate policies the initiative originally promised. Either way, the era of banks making grand climate pledges without facing serious political consequences is over.
The real question is no longer whether voluntary climate alliances can survive Republican opposition, but whether meaningful climate action in finance will require government mandates that short-term political pressure cannot affect.
