A global banking consortium, co-founded by Prime Minister Mark Carney in 2021 to combat climate change, has decided to disband. The UN-supported Net-Zero Banking Alliance announced that its members have opted to dissolve the membership-focused setup and instead utilize the climate guidelines established by the organization as a point of reference. Consequently, the alliance is ceasing its operations with immediate effect.
Carney played a pivotal role in launching the alliance during his tenure as the UN Special Envoy for Climate Action and Finance in preparation for the 2021 UN climate summit in Glasgow. Morningstar DBRS recently highlighted the increasing importance for banks to assess climate risks effectively to address the challenges posed by more frequent extreme weather occurrences. The report emphasized the significance of taking actions promptly due to potential delays in achieving the 2050 net-zero target and the escalating physical risks associated with climate change impacts.
The alliance, a crucial component of the broader Glasgow Financial Alliance for Net Zero, aimed to engage the financial sector in climate initiatives. Carney envisioned the alliance as a strategic platform to facilitate a comprehensive, swift, and profound transition to a net-zero economy. At its peak, the banking alliance boasted a membership of over 140 banks worldwide, with Canada’s major banks committing to establishing decarbonization goals for both the short and long term to drive emissions reductions.
Following pressure from U.S. Republicans, significant American banks withdrew from the alliance after the election of Donald Trump in November. Subsequently, Canadian banks, including RBC, TD, Scotiabank, BMO, CIBC, and National Bank, exited the alliance in January, pledging to continue their climate initiatives independently. Throughout the year, more institutions departed, with HSBC leaving in July. Despite the dissolution of the alliance, the frameworks developed by the group, such as guidelines on setting climate targets for banks, will persist, and efforts are ongoing to determine the best approach to advance climate finance endeavors.
