Major Global Banks are Leaving the Net-Zero Banking Alliance: Does It Matter?

Large Canadian banks have recently joined their U.S. counterparts in leaving the United Nations-convened Net-Zero Banking Alliance (NZBA), a group of leading global banks committed to aligning their lending, investment, and capital markets activities with a net-zero greenhouse gas emissions target by 2050. Meanwhile, top lenders in Europe are also reconsidering membership in the NZBA. In our view, the large North American banks' sudden exodus underscores an increasing tension between climate commitments and the Trump administration's agenda that is walking back or completely abandoning previous climate commitments made during the Biden administration. U.S. banks have also been facing legal challenges to environmental, social, and governance initiatives that limit financing of fossil fuel industries and could be in violation of antitrust laws.

Key highlights from this commentary include:

-- Large Canadian banks have recently joined their U.S counterparts in leaving the UN-convened Net-Zero Banking Alliance. The exit of big North American banks from the global sector's largest climate coalition will likely slow the region's climate transition momentum and increase climate physical risks.
-- Meanwhile, top European lenders are also reportedly reconsidering their memberships, although we do not expect them to disengage from their overall climate commitments.
-- None of the banks' credit ratings or trends in our coverage universe have so far been affected by climate considerations. However, we continue to monitor climate change-related risks and reflect their materiality in our credit assessment.