The Net-Zero Banking Alliance, or NZBA, has dropped the requirement for banks to set climate targets.
Banks now have greater flexibility in managing targets and transitioning across their balance sheets while maintaining net-zero by 2050 with low or no overshoot of 1.5°C pathways, demonstrating accountability to shareholders, investors, regulators, and society.
The NZBA said it supports banks in decarbonization through sectoral engagement, knowledge sharing, and target setting. Over 100 banks have established the climate targets, and many are developing transition plans. The new framework changes expand net-zero pathways, aligning with the goals of the Paris Agreement while ensuring low or no overshoot of 1.5 °C by 2050.
According to an earlier NZBA directive, banks were required to set climate targets that aim to limit global warming to 1.5°C and achieve net-zero emissions by 2050. The alliance, a UN-backed climate coalition, was launched in 2021 as part of the Glasgow Financial Alliance for Net Zero (GFANZ).
Going forward, NZBA’s member-approved changes will guide its next phase, focusing on sectoral engagement to deepen client relationships, address green growth constraints, and stimulate markets for investment.
The Alliance’s 129 members voted to convert key climate requirements into non-binding best practice guidance, following a year-long strategic review and rising US political and regulatory pressures. The decision builds on the Alliance’s significant achievements since its establishment in 2021. The Guidance for Climate Target Setting for Banks, an internationally recognized initiative, has facilitated the establishment of sector-specific climate targets for the first time.
“We are halfway through the critical decade for action on climate, and we need all sectors, including banking and finance, to commit to moving the needle on emissions reductions,” said Shargiil Bashir, Chair, NZBA, and Chief Sustainability Officer and Executive Vice President, First Abu Dhabi Bank. “As the largest global initiative specifically focused on supporting climate mitigation action by banks, NZBA is uniquely positioned to provide practical support to banks navigating the net-zero transition. I welcome the decision by members to progress NZBA into its new chapter.”
