The Net-Zero Banking Alliance (NZBA) recently unveiled the second iteration of its Guidelines for Climate Target Setting, sparking both praise and criticism from industry observers.
Established three years ago to align global banking activities with net-zero greenhouse gas emissions by 2050, the NZBA comprises 142 member banks, collectively representing 40% of global banking assets. The revised guidelines, set to take effect on April 22, 2024, underscore what the Alliance describes as its continued dedication to combatting climate change.
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Key enhancements to the guidelines include an expanded scope, now encompassing not only lending and investment activities but also capital markets arranging and underwriting activities. This extension aims to provide a more comprehensive approach to climate target setting, acknowledging the significant role these activities play in banking portfolios.
Moreover, the revised guidelines explicitly reference the imperative of limiting global temperature rise to 1.5ºC, aligning with the most ambitious target outlined in the Paris Agreement. However, critics argue that the guidelines fall short in addressing crucial issues, such as the discrepancy between sectoral intermediate targets and net-zero commitments among member banks.
Notably, the guidelines face scrutiny for their non-binding nature, which has led to inconsistencies in target-setting practices among member banks. Concerns persist regarding the effectiveness of the guidelines in driving meaningful climate action, particularly in light of recent departures from sustainability initiatives by some US banks.
Despite these criticisms, progressive members of the NZBA, including Amalgamated Bank, Ecology Building Society, and Triodos Bank, have voiced their support for stronger climate measures.
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By GlobalDataBankTrack, an NGO focused on bank accountability, urges NZBA member banks to align their targets with their net-zero commitments and exclude financing for fossil fuel projects.
As the urgency of the global climate crisis intensifies, stakeholders emphasise the need for decisive action from the banking sector. With the new guidelines set to shape the trajectory of climate finance, the pressure mounts for banks to demonstrate genuine commitment and accountability in their efforts to mitigate climate change.
