UN Climate Change Banking Alliance Falls Apart Under Legal Pressure

The UN logo is seen on a door at the United Nations headquarters (Photo by ANGELA WEISS / AFP)

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Following the Paris Agreement, the United Nations and world leaders began a push to reduce greenhouse gas emissions to “net zero.” This resulted in a series of IGO and NGOs aimed at changing the behaviors of businesses. Businesses were quick to join the climate change alliances, but accusations of antitrust violations began to threaten their future. Following a mass exodus, the Net-Zero Banking Alliance has announced they are ceasing operations and restructuring.

Adopted in 2015, the Paris Agreement set clear goals to reduce carbon emissions, or greenhouse gases, by 45% by 2030 and to reach net zero by 2050. Nations, intergovernmental organizations, and nongovernmental organizations began working on plans to implement a new regulatory framework to work towards the net zero goal. While GHG emissions are ranked by country, governments are not the major emitters. It is the people who live in those countries, through their consumption of goods and services, that emit GHG.

Strategically, any push to net zero must be taken through the regulation and control of the businesses that provide the goods and services used by the consumer to emit GHG. To enact these changes, a multi-pronged approach is being used. It starts with controlling businesses’ access to resources, including loans, insurance, and bank accounts.

The UN Principles for Responsible Banking led to the Net-Zero Banking Alliance. The NZBA initially included Bank of America, Citigroup, and HSBC. The NZBA members pledge to “transition the operational and attributable greenhouse gas (GHG) emissions from their lending and investment portfolios to align with pathways to net-zero by 2050 or sooner.”

In effect, banks pledged to not loan money to or open accounts with companies and industries that don’t meet GHG emission standards. The NZBA began facing antitrust questions from national regulators in 2023, In March 2024, they updated their guidelines to avoid litigation. However, the changed were not enough to deter prosecution.

Similar organizations formed for other sectors faced similar issues. In 2021, the UN formed the Net-Zero Insurance Alliance, where members agreed to use their portfolio to encourage businesses and other clients to implement net-zero actions. Similar to the NZBA, insurance companies pledged to not provide coverage to businesses who are not meeting GHG emissions standards. The NZIA started to fall apart in 2023 as questions increased as to if the alliance violated antitrust laws. It was dissolved in April 2024.

Following the 2024 Presidential election, the six largest banks in the U.S. left the NZBA. Citigroup, Bank of America, Morgan Stanley, Wells Fargo, Goldman Sacks, and JP Morgan announced their exit before President Trump was sworn in for his second term. In the United Kingdom, HSBC left in July, with Barclays following on August 1. This put the future of the NZBA in to question.

Announcing the exit, Barclays stated, “after consideration, we have decided to withdraw from the Net Zero Banking Alliance. With the departure of most of the global banks, the organisation no longer has the membership to support our transition.”

On August 27, the NZBA announced a restructuring. Rather than being an alliance of banks, it will become a “framework initiative.” The result will be a less influential organization focused on providing guidance for regulatory development, similar to the Legal Framework for Impact produced by the Principles for Responsible Investing.

The NZBA stated, “the Steering Group believes this is 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, as well as to continue engagement with the global banking industry to develop further guidance and tools needed to support them and their clients.”

The change must go before the remaining members, with the vote expected by the end of September. While not mentioned in the release, this will most likely result in a name change as well. The NZIA rebranded as the Forum for Insurance Transition to Net Zero. Expect something similar from the NZBA.

The dissolution of the Net-Zero Banking Alliance is another blow for climate change activists who have seen gains dismantled within the last year.