The Net-Zero Banking Alliance (NZBA) has confirmed changes to its framework, including an “acknowledgement of a wider range of net-zero pathways” instead of requiring members to align to a 1.5°C pathway.
As the external landscape for banks “has rapidly changed” in recent years, members “voted overwhelmingly in favour” of backing plans the NZBA said are designed to strengthen the support it provides to its members, following a year-long strategic review.
Members are now urged to “limit global temperature rise to well below 2°C and to strive for 1.5°C” in a move expected to increase flexibility for banks with exposures to a range of markets and sectors to manage targets and transition across their balance sheet.
Other plans include “a renewed focus on sectoral engagement” to support member banks to deepen client relationships and address constraints on green growth by working with their clients to advance policies that stimulate markets and unlock opportunities for investment.
However, NZBA committed to underscoring members’ “ultimate accountability” to shareholders, investors, supervisors, regulators and society.
“We are halfway through the critical decade for action on climate, and we need all sectors, including banking and finance, to commit to moving the needle on emissions reductions,” said Shargiil Bashir, NZBA chair as well as chief sustainability officer and executive vice president at First Abu Dhabi Bank.
“As the largest global initiative specifically focused on supporting climate mitigation action by banks, NZBA is uniquely positioned to provide practical support to banks navigating the net-zero transition. I welcome the decision by members to progress NZBA into its new chapter.”
Also read: ShareAction warns banks to ‘expect shareholder action’ if they don’t set robust climate targets
However, Jeanne Martin, co-director of corporate engagement at ShareAction, said she’s “deeply disappointed” that major banks have pushed the NZBA to water down its guidelines and climate targets.
“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. 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.
“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.”
Triodos Bank also announced it will leave the NZBA, accusing members of “lowering the climate ambition of the alliance” and setting less strict requirements.
“We believe that remaining a member under these less stringent guidelines and lowered ambitions, and also seeing that a lot of what we have achieved over the years is being watered down, would not align with our own climate ambition and commitment to combatting climate change,” a statement read.
“The decision reflects our deep concern that the shift from binding agreements to looser guidelines weakens the ambition needed to achieve the Paris climate goals.
“The reality is that the world is not on track to remain within safe levels of warming and that more needs to be done instead of less. That’s why we are choosing to act now, by focusing on short-term emissions reduction.”
Triodos also announced it would aim to reduce financed emissions by at least 42% by 2030, an increase from the 32% target it had previously committed to.
