The Green Billions

Net Zero Banking

Combating climate change will require financial services and committing to the targets. As credit providers and drivers of economic progress, banks can influence the consumption patterns of individuals and organizations by focusing on climate adaptability, resilience, and sustainability. The United Nations-convened Net-Zero Banking Alliance (NZBA) leads cooperation between banks worldwide to commit their portfolios to net-zero emissions by 2050. They provide an international framework and operational guidelines. 

As the banking element in the Glasgow Financial Alliance for Net-Zero (GFANZ), the NZBA advocates consistency in climate action. This includes standardization in interpreting what aligns with the Paris Agreement and its 1.5°C means and in accountability in demonstrating commitment. It facilitates capacity building through information sharing on implementation through guidance, peer learning, and information & resource sharing. By working with banks, customers, investors, and governments, they seek to identify gaps in the banking infrastructure that can help accelerate the net-zero transition. 

Member banks commit to setting robust science-based targets that identify carbon reductions in important economic sectors that align with the Paris Agreement. To this, banks must set and achieve 2030 and 2050 targets demonstrating progress. The commitment extends to their clients’ Scope-1, 2, and 3 (latter when significant and necessary). Banks must set sector-level targets for carbon-intensive sectors such as agriculture, aluminum, steel, cement, fossil fuels, real estate, and transport.

The NZBA has over 100 banks from 41 countries representing $68T (i.e., 38% of global assets). This includes many major banks from Europe, South America, and other countries in the global north. Yet, there is a long list of exclusions. The GFANZ excludes private equity firms, which have invested more than $1T in the previous decade into fossil fuels. Most banks from major emitters, such as India, China, Russia, and the United States, which combined account for almost half of global emissions, are also not represented. This can be due to varying net-zero commitments, fiduciary duties, or reluctance to be bound by additional obligations. This means that the assets of the majority of businesses in India are unlikely to be covered by NZBA member banks. Yet, there is a significant opportunity for organizations with international operations, especially in the 41 countries represented, to engage with services from NZBA member banks. 

That said, the NZBA is quite nascent, given that it is barely more than a year old. In this period, its membership has expanded by 70 banks, i.e., an expansion in representation from about 20% of global assets to 38%. This is quite a positive development, which may encourage banks worldwide to join the alliance. 


The NZBA is a growing alliance that may help bring standardizations to expectations within and from the banking sector on the topic of alignment with the Paris Agreement. Yet, given the lack of enthusiasm from banks in major emitting countries, it will be difficult to concert climate action efforts of banks that operate within and with these countries. Further, given that the GFANZ’s two co-chairs, Mark Carney and Mike Bloomberg, are controversial figures in their fields, climate action, and personal lives, support for the NZBA may not come easy. While Americans make up three of the four in the leadership of the GFANZ, most American banking mainstays have not joined the alliance, making for poor reading of the NZBA. That said, it is too early to comment much on the effectiveness of the NZBA, and only time will tell if the NZBA member banks will honor their commitments. It also remains to be seen what their impact will be and whether the lack of legislated national level obligations will hold back standardization efforts. 

Author’s Take | With banks from three of the seven biggest economies in the world , including India, not signing up for the NZBA yet, there is a lack of worldwide representation. Further, it may seem that India’s Net-Zero target does not match with the expectations of the NZBA. Thus, if an Indian bank joins the NZBA, it may be as pioneers in voluntary climate action. Moreover, this means that Indian businesses may not be able to contribute to the NZBA mission directly. However, businesses with international operations and ambitions can surely secure the services of member banks in whichever jurisdictions they operate in, including Europe and South America.

About the author Krishnakumar Ramachandran | Krishna is a Biosystems Engineer and Biotechnologist with a background in sustainability, biobased transition, bioplastics and biofuels, energy, agribusiness, and natural resources. Having worked in R&D and having started up, he ‘transitioned’ to sustainability to make a tangible impact to people and the environment. As a freelancer, he works with sustainability consultancies in ESG, GHG accounting, carbon offsets and credits, and tech-advisory. He writes articles on sustainability strategy, corporate sustainability, energy transition risks.