In a move to combat climate change, members of the Net Zero Banking Alliance have voted to update their Guidelines for Climate Target Setting.
According to ESG Investor, this update includes the notable addition of emissions facilitated by capital market activities, a significant step forward in aligning the banking sector with the most ambitious goals of the Paris Agreement and the latest scientific findings. Eric Usher, Head of the UN Environment Programme Finance Initiative (UNEP FI), highlighted the importance of this bank-led initiative in ensuring that both current and future NZBA members will continue to set targets that reflect the urgent need for action against global warming.
This decision was reached after more than 50% of NZBA’s members voted, with two-thirds of the votes cast in favor of the updates. The new capital markets targets are set to come into effect from 1 November 2025, showcasing the members’ commitment to a more comprehensive approach to emissions reduction. The NZBA, founded in April 2021 by UNEP FI, includes 143 members managing a whopping US$74 trillion in capital, marking it as a key player in the global transition to net zero emissions.
Despite these advancements, the banking sector faces challenges in reducing its financial support for the fossil fuel sector and other high-emitting industries. Recent findings have revealed that banks have provided US$3.2 trillion towards fossil fuel expansion since the 2015 Paris Agreement, with notable contributions from HSBC and Barclays. This financing has disproportionately supported fossil fuel activities in the Global South, highlighting the need for a more equitable approach to climate finance.
To aid banks in aligning their financing activities with the Paris Agreement goals, several frameworks and guidance documents have been developed. Notably, the Glasgow Financial Alliance for Net Zero (GFANZ) finalised its transition finance framework, and the non-profit think tank 2° Investing Initiative (2DII) published a whitepaper on the overlaps between NZBA’s guidelines and its Climate Impact Management System (CIMS). These efforts underscore the financial sector’s critical role in achieving net-zero emissions and the ongoing need for regulatory and policy support to ensure a just transition.
As the finance sector continues to navigate the challenges of aligning business models with climate goals, the collective efforts of initiatives like NZBA, GFANZ, and 2DII will be essential in driving impactful changes. The updated guidelines from the NZBA represent a significant step forward in this journey, demonstrating the sector’s increasing commitment to environmental stewardship and sustainable finance.
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