Introduction

The Net-Zero Banking Alliance (NZBA), launched in April 2021 under the umbrella of the Glasgow Financial Alliance for Net Zero (GFANZ), was designed to align global banking portfolios with net-zero greenhouse gas emissions by 2050. Member banks committed to setting science-based targets, disclosing emissions including those financed through lending and investment and aligning business strategies with a 1.5°C pathway. With more than 130 signatories at its peak, the NZBA once represented a powerful force in climate-aligned finance.

However, in a surprising shift, several major financial institutions, including JPMorgan Chase, Morgan Stanley, Bank of America, and most recently HSBC, have exited the alliance. These departures signal a turning point for climate finance coalitions. Why are the world’s most powerful banks walking away from what seemed to be a unified front on climate action?

The Origins and Ambitions of the NZBA

The NZBA emerged as part of a broader effort to unite financial institutions under shared decarbonization goals. Banks joining the alliance committed to aligning their operations and lending portfolios with net-zero emissions by 2050, including interim targets every five years. They also agreed to transparently report their progress and set targets validated by recognized bodies, such as the Science Based Targets initiative (SBTi).

The alliance emphasized emissions associated with financing activities, also known as Scope 3 emissions, which often represent the vast majority of a bank’s carbon footprint. With institutions like Barclays, MUFG, and Lloyds Banking Group at the forefront, the alliance projected credibility and a shift in capital markets toward climate-conscious lending.

Growing Tensions and Emerging Criticisms

Over time, the voluntary nature of the NZBA began to erode as governance structures and target-setting requirements became more rigorous. Member banks increasingly voiced concern that the alliance was becoming too prescriptive, particularly with the influence of SBTi and GFANZ.

Several banks argued that the evolving criteria risked creating legal liabilities. In the U.S., ESG-related initiatives have faced mounting political backlash, with certain states threatening litigation or boycotts against financial firms perceived as anti-fossil fuel. Banks feared that adhering to NZBA mandates could expose them to reputational and legal risk in such jurisdictions.

Others, especially those operating in economies with significant fossil fuel dependencies, criticized the alliance for a lack of flexibility in transition planning. Rather than providing a framework for gradual decarbonization, the NZBA was perceived by some members as imposing rigid rules that ignored regional energy realities.

The Exit of Major Players: U.S. Banks and HSBC

Between late 2024 and mid-2025, several founding and high-profile members announced their withdrawal from the alliance. Bank of America was among the first, followed by Morgan Stanley and JP Morgan. Each cited the growing regulatory burden and the need to develop climate strategies independently from multilateral alliances.

Table: Comparison of Exit Statements from Major Banks

Bank	Exit Date	Key Reason Cited
Bank of America	Dec 2024	Preference for independent target-setting
Morgan Stanley	Jan 2024	Political backlash and legal risk
HSBC	Jul 2025	Governance overreach and operational autonomy

American banks announced their exits in the period between Donald Trump’s 2024 election victory and his January 2025 inauguration. The incoming U.S. President has publicly supported expanded oil and gas investment and has repeatedly referred to climate change as a “hoax.” While never explicitly cited, this political shift may have been a influential factor in the timing of the U.S. banks’ decisions. Their departures reflect not only governance frustrations, but also rising concern about how U.S. federal policy will affect global sustainability efforts going forward.

In July 2025, HSBC became the most prominent non-American institution to leave. The bank stated that it would continue its net-zero strategy but sought greater autonomy in how it sets and governs its targets. HSBC’s departure was especially notable given its previously vocal support of the NZBA and its leadership role in sustainable finance in Europe and Asia.

Following the announcement of HSBC leaving NZBA, they posted on their website:

“We continue to support customers in all sectors to make progress towards their individual decarbonisation plans, recognising that the transition to net zero is not linear or uniform across sectors, markets, and regions. Our strategy is to provide our customers with pragmatic financing solutions that facilitate their progress and support long-term emissions reduction while advancing energy security and meeting the economic and industrial needs of today’s economy.”

Following HSBC’s announcement of its departure from the NZBA, Jeanne Martin, ShareAction’s Co-Director of Corporate Engagement, said:

“We strongly condemn HSBC’s decision to leave the NZBA, which is yet another troubling signal around the bank’s commitment to addressing the climate crisis. It sends a counterproductive message to governments and companies, despite the multiplying financial risks of global heating and the heatwaves, floods, and extreme weather it will bring.”

Critics argue that the exits weaken collective momentum, while defenders of the banks claim that net-zero goals can still be met through internal governance and shareholder engagement.

What This Means for the Future of Net-Zero Finance

The unraveling of participation in the NZBA reflects broader challenges in climate finance. As banks weigh net-zero commitments against regulatory pressures and market realities, voluntary alliances face a tough road ahead.

One outcome may be the shift from centralized, coalition-driven governance to decentralized, institution-specific climate strategies. While this could foster flexibility, it risks fragmentation and inconsistency. The credibility of net-zero commitments may suffer without standardized benchmarks or third-party verification.

Additionally, ESG backlash in the U.S. has cast a long shadow over climate finance efforts. Banks, particularly those with large domestic operations, are recalibrating their public climate commitments to navigate a politically polarized environment.

Conclusion

The departure of major banks from the NZBA underscores the tension between climate ambition and operational autonomy. While alliances like NZBA offer a framework for coordinated action, they must balance ambition with flexibility to retain relevance. The exits of JPMorgan, HSBC, and others raise important questions about how the financial sector can best contribute to global decarbonization goals.

Is this the beginning of the end for multilateral climate finance coalitions? Or a moment of necessary recalibration? As the dust settles, one thing remains clear: the journey to net zero in finance will be anything but linear.

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