Banks Risk ‘Zombie’ Net Zero Targets as NZBA Stalls

Highlights

• The Net Zero Banking Alliance (NZBA) has suspended its operations, raising concerns about “zombie” net-zero targets.
• Major U.S. banks have withdrawn from the alliance amid political and financial pressures, while financing for fossil fuels has increased.
• Critics warn that banks are prioritizing short-term profits over real decarbonization, risking credibility and climate progress.

The push for banks to end fossil fuel financing and support the shift to a low-carbon economy is at a crossroads. Four years after the launch of the Net Zero Banking Alliance (NZBA), the initiative has frozen its activities, leaving doubts about the credibility of banks’ net-zero targets.

The International Energy Agency (IEA) made its stance clear in 2021: To slow climate change, banks must stop funding oil, gas, and coal projects immediately. Yet, despite early momentum, the NZBA now risks becoming irrelevant as members step back from collective commitments while still claiming climate leadership.

Read More: Barclays Quits Net Zero Banking Alliance

A Pause That Feels Permanent

On August 27, the UN-backed NZBA announced it was pausing operations, with members set to vote on its future by the end of September. Critics argue the alliance had already lost significance as members watered down goals and shifted toward independent pledges.

Since December, 20 banks have quit the group, led by U.S. giants like Goldman Sachs, JPMorgan Chase, and Citigroup. Remaining banks have clung to their net-zero rhetoric, with Deutsche Bank recently releasing a new transition plan. However, financing trends tell another story. Fossil fuel funding by the 65 largest banks climbed to $868.8 billion in 2024, reversing two years of declines.

This gap between promises and actions has raised concerns about what Yale’s Todd Cort calls “zombie targets” or commitments that remain on paper but lack meaningful progress.

Political and Market Pressures

Banks’ exits have unfolded against a backdrop of political backlash. U.S. House Republicans branded climate alliances as “collusion,” while President Donald Trump’s administration has intensified attacks on ESG investing. In July, 23 state attorneys general even accused the Science-Based Targets initiative (SBTi) of violating antitrust laws after it refused to validate targets for financiers of fossil fuel projects.

Still, some analysts argue that politics is more of an excuse than the root cause. “Banks want the best of both worlds,” said Quentin Aubineau of BankTrack. “On one side, they want to be seen as climate leaders who are aligned with international climate goals. On the other side, they do not want to give up on short-term benefits and cut ties with their carbon-intensive clients, even if these clients are developing new fossil fuel projects that are incompatible with long-term climate goals.”

Barclays is a prime example, boasting $675 million in sustainable revenues last year, while also funneling $35 billion into fossil fuels, its highest in four years.

Weak Targets and Real Risks

Critics say the recent turmoil exposes weak foundations in banks’ commitments. “This raises questions about whether the initial commitments were driven more by a desire to follow trends and manage public relations than by a genuine intent to decarbonize,” said Saskia Straub of the New Climate Institute. She argues that real impact will come from banks engaging directly with high-emitting clients, imposing consequences, and shifting capital toward sustainable finance.

NGOs such as ShareAction and the Sierra Club are calling for regulators to step in, warning that voluntary alliances like NZBA will fail without enforceable rules.

Investor pressure is also growing. Just last week, PFZW, one of Europe’s largest pension funds, pulled nearly $7 billion from BlackRock over concerns about its climate commitments. “Banks that attempt to roll back on the vital commitments they have made to safeguard people and planet should expect significant pushback,” said Louise Marfany of ShareAction.

Also Read: SBTi Launches Net-Zero Guidelines for Financial Sector

The Stakes Ahead

The banking sector holds outsized power in shaping global emissions. With NZBA in limbo and fossil fuel financing ticking upward, critics fear the industry is sliding into a dangerous stasis, targets without teeth, promises without proof.

As climate deadlines draw closer, banks face a pivotal test: Continue funding fossil fuels under the cover of vague commitments, or take measurable steps toward genuine decarbonization. For now, the risk of “zombie” net-zero goals looms large.

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Source: TRELLIS