The UN-backed Net-Zero Banking Alliance (NZBA) has ceased operations following an exodus of member banks over the past year, in a move that is emblematic of the fading aura of ESG.
On Friday (October 3), the NZBA confirmed that its last-remaining members have voted to close the organisation with immediate effect.
Going forward, only the NZBA's published resources will remain accessible, and may still be used by banks that are seeking guidance on how to set decarbonisation targets.
“The Steering Group believes this is the most appropriate model to continue supporting banks across the globe and accelerate the real economy transition in line with the Paris Agreement,” the group’s leaders said ahead of the vote.
“Recognizing there is a major opportunity for banks and key stakeholders to build on the Alliance’s outputs and to accelerate action on key priorities, NZBA encourages the banking sector to remain steadfast in implementing their net-zero commitments.”
The NZBA was founded in April 2021 by the UN Environment Programme Finance Initiative (UNEP FI), with 43 banks from 23 countries as members.
Its founding goal was to align the banking sector with the Paris Agreement's target of limiting global warming to 1.5°C above pre-industrial levels.
Alliance members also committed to restructuring their lending and investment portfolios to hit net-zero emissions by 2050, with interim targets set for 2030 or 2035.
However, following the election of Donald Trump in November 2024, key members of the Alliance began to leave, apparently fearing judicial reprisals from the incoming administration, and triggering a cascade of exits.
In December 2024, Goldman Sachs became the first US bank to part ways with the group, followed by Citi, Bank of America, Morgan Stanley, Wells Fargo, and J.P. Morgan.
From over the border, they were soon joined by Royal Bank of Canada, the Bank of Montreal, and Toronto-Dominion Bank.
By the end of January 2025, the NZBA’s entire North American contingent had left, and in July and August this year respectively, UK banking giants HSBC and Barclays also exited the group.
Though not explicitly stated by any of the departing member banks, it is likely that the change of administration in the US sent a chilling effect through the NZBA, with members fearing a deregulatory push across the US energy sector, and a judicial backlash against existing ESG initiatives.
In June 2024, for example, the Republican-led House Judiciary Committee published a report on what it described as a “climate cartel” made up of left-wing activists and major financial institutions.
The ‘Big Three’ asset managers, BlackRock, Vanguard, and State Street - who are among the largest shareholders of all former NZBA member banks in the US - were named in the report.
More generally, institutions that take part in global “collaborative” associations, such as the Glasgow Financial Alliance for Net Zero (GFANZ), were also named.
According to the report, these groups are engaged in a campaign of “anticompetitive collusion” that is designed to force US companies to adopt ESG programmes and targets against their will.
In December 2024, following Trump’s election, the Committee published a similar report entitled ‘The Sustainability Shakedown’ .
In this report, the Committee vowed to examine whether current antitrust provisions in the US are sufficient to protect firms from the “unlawful restraints” and “monopolies” of the so-called cartel.
Back in the aviation world, these developments have taken place amid the emergence of a growing consensus that concern over ESG issues among investors and industry decision-makers has peaked, and is now fading fast.
The dissolution of NZBA comes little more than a year after the launch of the Pegasus Guidelines in April 2024 – a voluntary framework for banks to independently measure and disclose the emissions of their aviation lending portfolios. The Pegasus Guidelines were developed to align with the recommendations of the NZBA.
With participation from approximately 70 financial institutions, including Citi, BNP Paribas, and Standard Chartered, the Pegasus project may waver if judicial and regulatory concerns begin to discourage further action, following the example of NZBA.