The Net Zero Banking Alliance: An Introduction
The Net Zero Banking Alliance (NZBA) was launched in April 2021 as part of the UN-convened Net-Zero Banking Alliance, representing one of the most ambitious voluntary climate initiatives in the global financial sector. The alliance brought together over 140 banks from 44 countries, collectively controlling more than $70 trillion in assets—representing approximately 40% of global banking assets.
Core mission: NZBA members committed to aligning their lending and investment portfolios with net-zero emissions by 2050, consistent with limiting global warming to 1.5°C above pre-industrial levels. Banks pledged to set science-based interim targets for 2030, prioritize sectors with the highest climate impact, and publish transition plans within 18 months of joining.
Rapid deterioration and collapse: Despite its initial promise, NZBA experienced systematic deterioration beginning in late 2024. Following the 2024 US presidential election, six of the largest American banks—including JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs, Wells Fargo, and Morgan Stanley—withdrew from the alliance, representing a 22% decrease in total alliance assets.
The following scholarly papers provide the most comprehensive academic analysis of how and why this once-promising climate initiative failed to achieve its objectives:
Business as Usual: Bank Net Zero Commitments, Lending, and Engagement
Authors: Parinitha R. Sastry (Columbia University), Emil Verner (MIT Sloan School of Management), David Marques Ibanez (European Central Bank) – April 2024
Key findings:
This paper represents the first large-scale causal evaluation of NZBA’s impact using European Central Bank administrative credit registry data covering the near-universe of European bank lending, matched with bank-level net zero pledges and borrower-level emissions data. The research systematically rejects both primary mechanisms through which NZBA was supposed to drive decarbonization:
- Divestment hypothesis rejected: Net zero banks do not reduce credit supply to targeted sectors or increase financing for renewables. The study can rule out effects larger than 2.6% with 95% confidence.
- Engagement hypothesis rejected: Borrowing firms from NZBA banks are not more likely to set decarbonization targets or reduce verified emissions.
- Greenwashing evidence: Banks joining NZBA experience substantial improvements in MSCI ESG ratings (environmental scores increasing by 0.77 on a 10-point scale) without corresponding behavioral changes.
Broken Pledges: How Politics Undermined Net-Zero Ambitions in Banking
Author: Ana Sina (University of Reading) – June 2025
Key findings:
This paper provides empirical evidence documenting the political vulnerability that led to NZBA’s systematic collapse:
- Political causation: Bank withdrawals from NZBA were “driven exclusively by electoral outcomes in the United States, not financial or institutional factors.”
- Systematic institutional departures: Between late 2024 and early 2025, several systemically important institutions, primarily from North America and Japan, withdrew from NZBA following the Trump election victory.
- Climate risk validation: The study demonstrates that banks making tangible progress toward decarbonization targets exhibit significantly lower climate risk as measured by the CRISK metric.
An Examination of Net-Zero Commitments by the World’s Largest Banks
Authors: Carlo Di Maio, Maria Dimitropoulou, Zoe Lola Farkas, Sem Houben, Georgia Lialiouti, Katharina Plavec, Raphaël Poignet, Eline Elisabeth Maria Verhoeff (European Central Bank)– 2024
Key findings:
This comprehensive ECB study examines publicly available disclosures from 25 of 30 Global Systemically Important Banks (G-SIBs) that made net-zero commitments as of late 2022, using supervisory assessment frameworks. The authors identify fundamental weaknesses in NZBA frameworks:
- Disclosure quality issues: The study identifies “significant room for improvement” in net-zero commitments, with problematic practices including limited information sharing, tentative language, and commitments to unclear goals.
- Portfolio alignment problems: Banks often select scenarios that don’t reflect their portfolio allocation, use outdated benchmarks, or employ unvalidated methodologies.
- Greenwashing risk: The research identifies multiple areas where banks’ disclosures “risk creating doubt about the soundness of their net-zero commitments,” potentially constituting entity-level greenwashing.
An Empirical Examination of Business Climate Alliances: Effective and/or Harmful?
Authors: Matteo Gasparini and Peter Tufano (Harvard Business School) – May 2025
Key findings:
This study of 11 major climate alliances and 424 financial institutions provides broader context for NZBA’s limitations:
- Mixed evidence: While finding some positive effects (increased management practices, emissions targets), the research shows “no reduction in funding to oil and gas companies”.
- Limited real impact: Despite participation in multiple alliances, the study reveals diminishing returns and limited substantive changes in financing behavior.
