Net Zero Banking Alliance Pledge Likely to Remain Ambitious Despite Departures

In this commentary, we cover different climate scenarios to understand the potential credit implications for banks if the Net Zero Banking Alliance (NZBA) were to commit to align to a warming well below 2 degrees Celsius instead of a pledge to limiting warming to 1.5 degrees Celsius.

Key highlights:

-- A potential change in NZBA pledge as recently discussed by some media would be a pragmatic move, given the slow pace of transition we have seen, while likely remaining an ambitious target.
-- We consider that banks are generally better equipped today than back in 2015 to address climate change risks.
-- We do not anticipate material credit implications for our rated banks' creditworthiness, but more expensive efforts (because they have been delayed) could affect credit costs over the longer term.

"Large banks are generally familiar with the various forms of risks climate change can take as evidenced by their climate reports and thanks to the increasing use of climate scenarios, which continue to be improved to reflect the evolving climate commitments (like less ambitious climate policy implementation), new economic data and new model versions," said Vitaline Yeterian, Senior Vice President, Sector Lead, European Financial Institution Ratings. "As such, we expect large banks will continue to adjust their strategy, governance, and risk management systems accordingly."

Note this is an updated version of our original commentary published on 13 March 2025 to clarify that the NZBA has not changed its current pledge yet but it is instead asking member banks to vote on a new one according to recent news reports.