The Net Zero Banking Alliance (NZBA), a key UN-backed coalition of financial institutions committed to climate-friendly investments, has suffered a major setback with the withdrawal of six of the largest American banks. With JP Morgan becoming the latest to exit, only three smaller US banks remain in the alliance. This mass departure underscores the growing tension between climate goals and political resistance in the US financial sector.
NZBA: A Climate Commitment Now in Question
The NZBA, launched ahead of COP26 in 2021, is a global network of banks pledged to align their financing with net-zero emissions targets by 2050. With 136 members across 44 countries managing assets worth $57 trillion, the alliance was meant to be a major driver of climate-conscious banking. However, its effectiveness has long been debated, with critics questioning whether it amounted to little more than voluntary greenwashing.
One of the key commitments required banks to track and reduce their financed emissions, including indirect (Scope 3) emissions from their clients. However, loopholes in accountability such as the exclusion of off-balance-sheet financing already cast doubt on the alliance’s impact.
Why Are Major US Banks Leaving?
Since December 2024, five major US banks Bank of America, Citigroup, Morgan Stanley, Wells Fargo, and Goldman Sachs have exited the NZBA, followed by JP Morgan in January 2025. The departures coincide with rising Republican opposition to Environmental, Social, and Governance (ESG) policies, particularly in finance.
Republican lawmakers argue that climate-aligned lending practices amount to economic discrimination against fossil fuel companies. They claim that such alliances violate antitrust laws and consumer protection policies by pressuring banks to avoid financing coal, oil, and gas projects. Recent lawsuits against BlackRock, Vanguard, and State Street highlight the growing legal scrutiny over financial institutions’ ESG commitments.
With Donald Trump returning to the White House, major banks appear to be repositioning themselves to avoid political and legal backlash. Yet, despite their exits, most banks maintain they remain committed to achieving net-zero emissions just not through the NZBA.
Did the NZBA Ever Make a Difference?
The effectiveness of the NZBA has long been debated. While it was meant to align financial flows with the Paris Agreement, reports suggest US banks continued to heavily fund fossil fuel projects even while being part of the alliance. JPMorgan Chase, for instance, provided $41 billion in fossil fuel financing in 2023 alone. Bank of America, Citigroup, and Wells Fargo ranked among the world’s top five fossil fuel financiers between 2016 and 2023.
European banks, in contrast, have pushed for stricter climate finance rules. However, American banks largely resisted stronger commitments, remaining in the NZBA only after its leadership clarified that participation was voluntary. This reluctance further reinforced concerns that the NZBA was failing to deliver meaningful climate action.
What Comes Next?
The collapse of US bank participation in the NZBA raises larger questions about the future of climate finance. The Paris Agreement’s Article 2.1(c) calls for aligning global financial flows with climate resilience, yet enforcement mechanisms remain weak. Without major banks onboard, the ability to hold financial institutions accountable for their role in climate change becomes even more difficult.
While these exits may not be an outright failure for climate finance, they signal a shift in strategy one where banks prioritize shielding themselves from political scrutiny over making meaningful climate commitments. Whether this spells the end of collective climate finance efforts or sparks a stronger regulatory push remains to be seen.