On April 21, 2021, six months before the crucial Glasgow climate summit, 43 founding signatory banks launched the Net-Zero Banking Alliance (NZBA), making a bold commitment to bring down all emissions related to their lending and investment portfolios to ‘net zero’ by 2050, or sooner.

It was a high-stakes promise that made global headlines. Signing up meant that member banks had 36 months to set mid-term portfolio targets and reduction plans for all or a significant part of the carbon-intensive sectors they finance, such as steel, cement, coal, oil & gas or power generation. For a sector long accused of being complicit with climate injustice worldwide, because of its massive financing for the fossil fuel industry, this seemed like a real breakthrough.

Three years have passed since that bold promise of these founding banks to play their part in combating the climate crisis, and the strains are starting to show. Bloomberg recently reported the growing frustration of a banker from NZBA founding member UBS, because the finance industry is “being asked to align loans, investments and capital-markets portfolios with a global warming trajectory of 1.5C, while the planet may in fact be hurtling toward a 2.8C increase”.

He also criticised “unrealistic expectations from regulators, civil society and climate activists around the industry’s role in getting the planet to net zero”. This perception is symptomatic of the shortcomings of the NZBA, under which member banks voluntarily commit to achieve net-zero in their lending and underwriting portfolios by 2050. Those banks are now “having second thoughts as the real-world ramifications of acting on those pledges become painfully apparent”, as Bloomberg’s article puts it. 

New NZBA Guidelines are not tackling the problem

The NZBA now has 144 member banks, together controlling 41% of global banking assets. Most of these banks have already set some sectoral decarbonisation targets, following the first set of NZBA Guidelines for Climate Target Setting.(1) However, the third anniversary of the NZBA also marks the effective date of application of version 2 of the Guidelines, adopted in March 2024. From now on, “all new targets which are set or existing targets which are reviewed shall be aligned” with the new version of the Guidelines.(2)

As BankTrack pointed out recently, these new Guidelines are far from what is needed to guarantee that NZBA member banks’ future sectoral targets will be consistent with their net-zero objective by 2050. They briefly mention the possibility for banks to disclose “exclusions and prohibited activities, such as the exploration or production of oil and gas in protected areas” but this is by no means an obligation for adopting banks.(3) The guidelines also refer to the COP28 outcome and the need to “transition away from fossil fuels in energy systems” but considering the deficiency in the implementation of the previous Guidelines, it’s hard to believe that this feeble wording will lead NZBA member banks to develop policies effectively excluding fossil fuels. As long as the NZBA allows its members to set sectoral decarbonisation targets while financing fossil fuel developers at the same time, it is hard to see how overall financed emissions can effectively be brought down to net zero. 

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Following the publication of the second version of the Guidelines, three NZBA banks that are also members of the Global Alliance for Banking on Values, the GABV (Amalgamated Bank, Ecology Building Society and Triodos Bank), expressed their concerns about the low ambition level of the Guidelines, stating that “the dominant economic and scientific climate scenarios make abundantly clear the need to end new fossil fuel expansion and rapidly phase out supply in favour of clean energy sources”. Germany’s GLS Bank, also a member of the GABV, left the NZBA in January 2023 in protest at members’ continued financing of fossil fuels.

An alarming failure to significantly reduce financed emissions

Doubt about the efficacy of the NZBA commitments is not just confined to civil society observers such as BankTrack. A European Central Bank working paper in March 2024 casts doubt “on the efficacy of voluntary climate commitments for reducing financed emissions, whether through divestment or engagement”. On one hand, the paper found “no evidence of divestment” by NZBA banks from targeted sectors compared to non-NZBA banks.(4) On the other hand, it explained that “banks are less likely to exit from relationships with firms in targeted sectors”,(5) and that “NZBA banks are more likely to enter into new relationships in the targeted sectors”.(6) This follows from most NZBA banks’ public prioritisation of engagement strategies over exclusion policies. Nevertheless, the paper found that clients of NZBA banks are not more likely to set a decarbonisation target than clients from non-NZBA banks. Overall, the paper suggests that “voluntary private-sector initiatives may have relatively little impact on decarbonization”. Therefore, it confirms that voluntary climate commitments alone are insufficient to reduce financed emissions.

Inconsistency between commitments and concrete actions

One obvious real-world impact of the NZBA pledge should be that banks bring down their finance for fossil fuels. However, while the NZBA founding banks did set their sectoral targets, their finance for fossil fuels expansion has continued at high levels. To illustrate, of the world’s 60 largest banks featured in the forthcoming Banking on Climate Chaos 2024 report, 42 are NZBA member banks, yet our findings do not indicate that NZBA member banks are reducing fossil fuel finance faster than the non NZBA banks featured in the report.

Meanwhile, our NZBA Tracker monitors the progress of 60 NZBA banks towards their decarbonisation targets for the coal, oil & gas and power generation sectors. It shows that, while banks are expected to implement structural policies to reach their sectoral decarbonisation targets, in most cases so far, financed emissions reported annually by banks do not show a clear reduction trend since the adoption of sectoral targets.

Among the 60 banks assessed in the tracker, 51 have set a decarbonisation target for the oil & gas sector. 36 banks have set their oil & gas target using the International Energy Agency’s Net-Zero Roadmap by 2050 and seven others have used at least two climate scenarios including the IEA’s Net-Zero scenario.

The initial version of this scenario was published in May 2021. It was crystal clear that “beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our pathway, and no new coal mines or mine extensions are required”. Its latest update from September 2023 confirmed that “no new long-lead time upstream oil and gas projects are needed in the NZE Scenario, neither are new coal mines, mine extensions or new unabated coal plants”.

Although 43 banks referenced in the NZBA tracker have used the IEA’s Net-Zero by 2050 scenario to set their oil & gas target, Danske Bank so far is the only bank that has adopted an exclusion policy for oil and gas companies developing new upstream projects. The other 42 banks still allow themselves to provide finance to oil & gas companies developing new upstream projects, which is incompatible with the climate scenario that these banks use to set their oil & gas decarbonisation target. Considering such inconsistency, it’s easy to understand while NZBA member banks are so far not significantly reducing their financed emissions.

Three years after the bold promise of the first NZBA banks to set their institutions on a firm course to net zero, the initiative so far delivered very little to instil confidence in that promise. Given the lack of impact of sectoral decarbonisation targets adopted by member banks on financed emissions, we urge NZBA member banks to commit to stop financing new fossil fuel projects, and companies developing those projects, as the necessary step to move towards reaching the 1.5 degree goal of the Paris Agreement. After three long years of mostly talk, it is high time to start the walk.

Quentin Aubineau is Policy Analyst, Banks and Climate, for Bank Track. This article was originally published on Bank Track as a blog on 23 April.


(1) NZBA, Guidelines for Climate Target Setting for Banks, April 2021.

(2) NZBA, Guidelines for Climate Target Setting for Banks Version 2, March 2024.

(3) Ibid. P.11.

(4) Parinitha (Pari) Sastry, Emil Verner, David Marques-Ibanez, Business as usual: bank climate commitments, lending, and engagement, European Central Bank, Working Paper Series, No 2921, 22.03.2024. Table 1: NZBA Joining Dates and Sectoral Targets, P.41.

(5) Ibid. P.23-24.

(6) Ibid. P.34.