Greenwashing

The NZBA is a voluntary network of global banks committed to “align lending and investment portfolios with net zero emissions by 2050”. […]  At its height, the coalition boasted 40% of global banking assets. And at the time of its launch, its co-founder, the former Bank of England governor Mark Carney, described the NZBA as the “breakthrough in mainstreaming climate finance the world needs”.

So far a breakthrough remains at large. In evaluating the NZBA, the benchmark that ultimately matters is that of curbing global emissions and fossil fuel expansion. On both of these points, it’s not clear that the alliance has had any effect. Banks’ targets have been met with widespread criticism concerning lack of transparency and inconsistent or questionable methodologies, and recent research shows little to no difference between the financing and engagement impact of NZBA members and non-members. A separate study found banks that self-present as eco-conscious lend more to polluting industries than those that don’t. Impressively, there has been an overall uptick in fossil fuel financing since 2021 – after the group was formed.

But this raises a critical question: if these alliances were voluntary, non-binding, and seem to have done close to nothing to hinder banks financing fossil fuel expansion, why are banks bothering to quit?

The answer is always, in finance, a calculus of risk. At the time of NZBA’s founding, banks faced considerable reputational risk for being seen as climate laggards. The wind was in the sails of governments and institutions touting climate action, and banks acted accordingly. Today, on the back of record fossil fuel profitability, a protracted backlash against “woke capital” and the second coming of Trump, the calculus has changed.

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In a statement published on 31 December, GFANZ announced it would drop its requirements for members to publish firm targets, allowing “any financial institution working to mobilise capital and lower the barriers to financing energy transition to participate” and earlier this month announced it would no longer work as an umbrella organisation, but a stand-alone body working to “mobilise” climate finance. For a project that still retains many prominent European banks within its ranks, the crumbling to pressure and change of direction was remarkably swift. More cynically, it might be read as an admission that all these “targets” and “disclosures” never meant much at all.