The Net Zero Banking Alliance (NZBA) announced drastic changes to its alignment rules for members. NZBA previously required members to adopt Paris-aligned strategies that would limit rising temperatures to 1.5°. However, after an overwhelming majority of members voted to alter this policy, NZBA is now removing this as a requirement. Edie.net reports on the changes stating:
“In place of mandatory alignment with the 1.5C target, the NZBA will now recommend that member banks align their strategies with the broader goal of keeping temperature rise ‘well below 2C, aiming for 1.5C,’ in line with the original language of the 2015 Paris Agreement. The vote, backed by an overwhelming majority of the Alliance’s 129 members, effectively converts key climate requirements into non-binding ‘best practice’ guidance.”
The new policy comes as a disappointment to many but reflects changing attitudes towards decarbonization in the US and Europe. Many US banks left NZBA in recent years after being threatened with antitrust enforcement. Simultaneously, decarbonization and the green agenda are being scaled back in the EU as revisions to major ESG legislation are debated. The pullback also reflects realities of how the global economy is doing in decreasing carbon emissions. Just last month, Scientific American reported that Morgan Stanley is preparing for “a 3°C world.” In light of this decision, some banks have chosen to exit NZBA which they argue is taking a step backward by loosening requirements. Only time will tell if NZBA will remain relevant in the wake of its decision, or if other industry groups will form with more stringent requirements.
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