Banking’s Challenged Climate Coalition Encounters Setbacks in Europe

Amidst the largest global climate coalition for banks, speculation is rising that a potential migration from Wall Street could reach the European Union.

A source, who wished to remain anonymous due to sensitive discussions, revealed that some major EU banks heavily exposed to the US may contemplate leaving the Net-Zero Banking Alliance (NZBA), an initiative aimed at decarbonizing global finance. The primary concern revolves around the risk of being perceived as having an anti-oil stance in the US.

If EU banks withdraw from the NZBA, it would mark a pivotal moment for the coalition. In the US, intensified political scrutiny following President Donald Trump’s reelection has created obstacles, as banks face potential lawsuits and GOP blacklists linked to their commitments to the NZBA. Conversely, in the EU, net zero targets have become legally binding, with many banks in the region recognized for their environmental consciousness.

An NZBA representative confirmed the alliance’s dedication to supporting its remaining members but declined to comment on any potential EU withdrawals. They highlighted the necessity for “long-term work that demands courage, consistency, and genuine leadership to stay focused amidst challenges.”

Recently, BNP Paribas SA, Europe’s largest bank by assets, has been reevaluating the advantages of its NZBA membership, according to an insider. While the bank is cautious about attracting unwanted attention by exiting, discussions as of June suggested a potential delay in arriving at a formal decision until year-end. A BNP spokesperson refrained from providing additional details.

Deutsche Bank AG, Germany’s largest lender, indicated it is “monitoring ongoing developments” and will assess the situation as necessary, maintaining that its sustainability and net zero aims are still in place.

A representative from Spain’s Banco Santander SA confirmed their ongoing commitment to net zero but did not indicate whether they will continue with NZBA membership.

According to a UniCredit SpA spokesperson, the bank reiterated its status as an NZBA member, with a net zero transition plan focused on supporting clients in the shift towards low carbon.

Commerzbank AG is actively tracking “market trends, regulatory changes, and jurisdictions to ensure timely and appropriate responses,” stated Beate Schlosser, a spokesperson for the bank, who affirmed that its commitment to a 2050 net zero goal remains valid.

Bank executives have previously cited the collaboration opportunities with other institutions as a reason for remaining in the NZBA. However, as withdrawals increase, this benefit appears to be waning. Barclays Plc, which exited earlier this month along with UK peer HSBC Holdings Plc, noted that the current wave of departures demonstrates that NZBA “no longer has the membership base to support our transition.”

Barclays’ exit was promptly followed by UBS Group AG of Switzerland. Although these departures involve banks from non-EU regions, they have heightened speculation about potential future exits by EU banks, according to the insider.

The importance of climate alliances like NZBA remains a topic of debate. Lisa Sachs, director of Columbia University’s Centre on Sustainable Investment, pointed out a significant vulnerability in frameworks such as NZBA: the assumption that the finance sector can effectively influence the low-carbon transition merely by establishing emission reduction targets and motivating portfolio companies to decarbonize.

“Financial institutions are not equipped to remedy market deficiencies or drive societal transitions, as their primary responsibility is to optimize returns within prevailing market conditions,” she observed. “Their risk assessments focus on immediate factors rather than long-term societal threats.”

According to its website, NZBA currently features 125 members globally, collectively holding assets worth $41 trillion. Northern European banks, like ING Groep NV, ABN Amro Bank NV, Swedbank AB, SEB AB, and Danske Bank A/S, have been vocal in their support, as indicated by their spokespersons.

The alliance was created to motivate banks to facilitate the net zero transition. Initially, members were tasked with aligning their financing activities with the aim of limiting global warming to 1.5°C. However, after significant losses in North America earlier this year, NZBA revisited its requirements and adjusted its stance to a more supportive role.

This alteration indicates a substantial decline in the coalition’s stature, which was founded in 2021 and celebrated by global bank leaders during the COP26 climate summit in Scotland. At that time, amidst crisis-low interest rates and promising pandemic-driven opportunities for a green energy surge, net zero financing appeared to be a viable business strategy. This notion was further supported when US President Joe Biden enacted the Inflation Reduction Act — the largest green legislation in US history — a year later.

Ironically, even as the NZBA confronts membership losses, fossil-fuel financing seems to be receding on Wall Street. Policies aimed at increasing supply and reducing prices have seriously impacted the oil sector, with analysts from JPMorgan Chase & Co. suggesting that this period could mark the first decrease in global upstream oil and gas development spending since 2020.

Overall, financing directed at oil, gas, and coal projects by the six largest banks on Wall Street has fallen 25% to $73 billion this year as of August 1, compared to the same period in 2024, according to Bloomberg’s data.

“A fundamental truth is that financial institutions follow markets — they don’t create them,” Sachs from Columbia noted.

Banks that have withdrawn from NZBA in the UK are facing pushback from clients and investors. HSBC has lost several green customers, and the Church of England Pensions Board reports that it is currently “engaging” with both Barclays and HSBC regarding their exits from the alliance.

“As a shareholder, we expect banks to sincerely commit to addressing genuine, quantifiable financial risks such as climate change,” expressed Laura Hillis, director of responsible investment at the pensions board. “It’s clear that some banks are reluctant to uphold their long-term commitments, raising governance concerns.”

At the same time, banks leaving NZBA assert they will continue to support clients in their decarbonization efforts. UBS stated on August 7 that its “commitment to sustainability remains steadfast and acknowledges the need for a structured transition to a low-carbon economy.” Departing banks are also maintaining their sustainable finance goals; for example, HSBC reported engaging in $54.1 billion in transactions labeled as sustainable finance during the first half of 2025, reflecting a 19% rise from the previous year.

The underlying reality remains that financial institutions’ decisions are dictated by the viability of specific investments, based on current market conditions, policies, and risk-return considerations,” remarked Sachs from Columbia.

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