The Net-Zero Banking Alliance (NZBA) formed in the spring of 2021 to great fanfare. Banks in the alliance made a voluntary commitment, signed by their CEO, to set and publish targets that are aligned with pathways for net zero by 2050, reduce emissions associated with their material financing activities in carbon-intensive sectors, and develop transition plans to achieve the targets.

Founding members of NZBA included Bank of America, Citigroup, and Morgan Stanley. JPMorgan Chase, Goldman Sachs, and Wells Fargo joined later that year. But by January 2025, all six had quit the alliance, leaving only three small U.S. banks as members. Part of the reason for these departures is surely the U.S. political climate – not entirely, though. All major Canadian banks left NZBA shortly after the U.S. banks, and in March, three large Japanese banks revoked their memberships. Moreover, Wells Fargo in February dropped its net zero commitment completely, claiming that factors “outside our control,” such as public policy, consumer behavior, and technological change, limited the ability of their clients to adopt lower-emitting operating models. This statement is reasonable in light of general agreement that net zero emissions by 2050 will be very difficult to achieve.

Nevertheless, many of the factors cited by Wells Fargo as “outside their control” were influenced by the banks themselves as they lobbied against Paris-aligned climate policies, made insufficient efforts to finance green technology, and refused to cut financing to new fossil fuel fields as was recommended by the International Energy Agency’s Net Zero Emissions scenario. The banks evidently viewed their commitments largely as virtue signaling – if the world went the way of Paris alignment, the banks could claim credit for helping. If Paris alignment was unachievable, the banks could claim that their financing merely reflects their external environment. Either way, their strategy seems to have been to maximize their investment opportunities irrespective of their NZBA commitment.

This suspicion wasn’t lost on shareholder proponents, who filed net zero climate finance accountability resolutions even before the NZBA was formed. Topics have included variations of carbon reduction targets in loan portfolios, time-bound commitments to end financing of new fossil fuel fields, requests for transition plans, and more fulsome disclosure of how banks assess their clients’ transition readiness.

Other proponent strategies have targeted the banks’ desire to finance green projects, such as the energy supply ratio and just climate finance proposals on the ballot this year. These proposals, in focusing on money-making opportunities, are squarely in the realm of financial materiality.

The combination of these efforts has led to advances in disclosure. Following negotiated withdrawals, Citigroup now reports that it undertakes client transition plan assessments, and JPMorgan agreed to disclose its Carbon Assessment Framework for clients, along with its Energy Supply Financing Ratio, in its 2024 Climate Report. Engagement with proponents led Morgan Stanley to update its Environmental and Social Policy Statement to include community impacts in its climate risk due diligence.

NZBA or not, banks must be more transparent about their roles in financing the climate transition. With investor support, needed progress is within reach.