GUEST EDITOR FOR JULY 2026-SANAT RAMANATHAN, 15 Years, UWCSEA Singapore.
When HSBC and Barclays, the two European banking giants, walked away from the Net Zero Banking Alliance this summer, they didn’t just leave the climate pledge; they also signalled to the world that collectively fighting climate change is not a priority for the world’s biggest institutions.
The Net-Zero Banking Alliance (NZBA), launched at the U.S. Leaders Summit on Climate in 2021 with HSBC as one of the founding members, was convened through the UN but funded and executed by major private institutions. In just four years, its membership has more than tripled, positioning it as the world’s leading coalition of banks committed to financing the net-zero transition. Beyond setting sector-specific climate targets, the NZBA provides technical support, builds member capacity for sectoral engagement, and develops new approaches and metrics around transition planning and finance. By enabling businesses and households to cut waste, invest in clean technologies, and protect their assets, member banks have sought to frame climate action not only as a moral imperative but as a source of long-term financial growth and risk management.
Analysts suggest the withdrawals were an effort to preempt “anti-woke” criticism from right-wing U.S. politicians, pressure that intensified with Donald Trump’s return to office. His repeated use of the slogan “drill, baby, drill” during the 2024 campaign and inaugural address underscored a renewed commitment to fossil fuel expansion, framed as a solution to the U.S. “energy crisis,” and reinforced his pledge to make the country the world’s largest oil and gas producer. Pressure was also faced through Right-wing political attacks in the US that have targeted financial institutions’ membership in net-zero alliances. Moreover, in November 2024, a Coalition of states led by Texas sued BlackRock, Vanguard, and State Street (large asset managers) for “pro-climate” policies aimed at reducing coal use. The Republican-led House Judiciary Committee also accused “a cartel” of financial firms & climate activists of colluding to “impose radical ESG goals” on US companies. This growing political pressure, especially evident during the transition to the new U.S. administration, encouraged major banks to recalibrate their positioning — seeking alignment with prevailing Republican priorities and creating distance from earlier Democratic associations — which contributed to their decision to withdraw from the NZBA.
While political dynamics and profit considerations were central, they were not the only factors driving banks’ exits from the NZBA. Some institutions voiced concerns that the alliance’s standards had weakened — most notably when its 1.5 °C alignment requirement was relaxed to a broader 2 °C pathway — undermining its credibility. Others pointed to potential legal risks, with regulators warning that collective target-setting might be interpreted as anticompetitive. For global banks operating across multiple countries, diverging regulatory expectations between the U.S., Europe, and Asia also made compliance complex. At the same time, membership exposed banks to reputational risks on both sides: climate advocates accused them of greenwashing, while critics charged them with undermining energy security.
For the world, the withdrawal of these large financial institutions from the alliance means that the approach of global financial institutions helping out with green policies and ideas may be fading and shifting to a more privatised and flexible approach, where firms have more autonomy.
However, unhindered by the huge losses in membership, by mid-2025, the NZBA had grown to include 145 banks across 44 countries, representing about 41% of global banking assets. Yet this trajectory has been undercut: the alliance recently scaled back its climate ambition, from a 1.5ºC goal to a 2ºC target, triggering an asset contraction of 22%. In response, the NZBA has paused operations and is preparing to shift from a membership structure to a guidance-focused framework reflecting the shift of global trends and preferences by global banks.
Although the NZBA is weakened, it doesn’t spell the end of green finance and ESG, but reflects a transition of how NZBA handles new upcoming problems and structural reforms to allow green finance in this volatile environment, with backlash coming from all angles. Whether this decentralisation will dilute ambition or unleash more practical, context-specific solutions remains to be seen. What is certain, however, is that the credibility of climate finance now hangs on whether institutions can back rhetoric with action, even outside the shelter of global alliances.