Net Zero Banking Alliance eases climate rules, retreats from 1.5°C target

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🗞️ Driving the news: The Net Zero Banking Alliance (NZBA), a UN-convened coalition of over 120 global banks, has voted to relax its climate alignment target from a strict 1.5°C pathway to the broader “well-below 2°C” goal of the Paris Agreement
• The shift — endorsed by 90% of participating members — cites coordination challenges, slow policy momentum, and sectoral transition hurdles as justification

🔭 The context: Launched in 2021, the NZBA had positioned 1.5°C as the central benchmark for member institutions' net-zero transition plans
• However, limited technological progress, political pushback on ESG in key markets (notably the U.S. and UK), and inconsistent decarbonization across industries have prompted a recalibration
• The change mirrors a broader trend of retreat among major financial institutions from ambitious climate targets

🌍 Why it matters for the planet: The NZBA’s retreat from the 1.5°C target risks undermining the integrity of voluntary climate commitments within the financial sector
• As global banks collectively finance trillions in corporate and infrastructure investment, weakened benchmarks could delay systemic decarbonization and impair efforts to avert the most severe climate impact 
• The move also heightens legal and reputational risks, particularly as climate-related financial disclosure rules tighten

⏭️ What's next: The NZBA plans to pivot from target-setting toward implementation support, offering sector-specific guidance and tools such as capacity-building webinars
• Scrutiny from regulators, investors, and civil society is likely to intensify, especially with only 30% of major emitters currently aligned with 1.5°C-compatible transition plans
• Legal challenges may arise if banks cannot justify the rollback against prior public commitments, especially amid worsening climate risks

💬 One quote: “We are deeply disappointed that major banks have pushed the NZBA to water down its guidelines on 1.5°C… even as we are seeing historic droughts and catastrophic floods,” — Jeanne Martin, Co-Director of Corporate Engagement at ShareAction

📈 One stat: Only 30% of major global emitters currently have 1.5°C-aligned transition plans, underscoring the gap between financial commitments and climate science

See on illuminem's Data Hub™ the sustainability performance of HSBC and its peers Wells Fargo, and Morgan Stanley

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