Most banks in the industry’s biggest climate alliance endorsed a proposal that will refocus the group on providing financial support for the energy transition and also hold signatories to a less stringent standard for reducing the emissions enabled by their lending.

Shargiil Bashir, chair of the steering group for the Net-Zero Banking Alliance, said in an interview that “well above” two-thirds of members voted on implementing a new strategy, and of those, more than 90% support the new direction. While he declined to provide a breakdown by region or disclose how specific banks voted, Bashir said the plan had “overwhelming support” from the group’s approximately 130 members.

The vote of confidence in NZBA follows a tumultuous few months for the group. While once claiming to represent more than 40% of global banking assets, the alliance’s asset base has contracted by about a third, or roughly US$27 trillion, since the beginning of December, according to data from its website.

What started as a Wall Street exodus, with U.S. banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. leaving NZBA, became a bigger walkout, with the largest lenders in Canada and Japan also quitting the alliance.

The next phase for NZBA is “moving from a direction that was very much about net zero target-setting towards implementation,” said Bashir, who is also the chief sustainability officer at First Abu Dhabi Bank. This means “unlocking those opportunities to support and finance the transition,” he said.

The new approach is intended to offer greater flexibility to members. Requirements such as the need to set five-year goals for reducing the financed emissions from high-carbon sectors will now become recommendations, according to briefing documents that NZBA shared with its members. In addition, a prior mandate for signatories to align their portfolios with an aim of limiting global warming to 1.5C will be done away with.

NZBA previously demanded members transition all greenhouse gas emissions from their lending and investment portfolios “to align with pathways to net zero” by 2050 at the latest “consistent with a maximum temperature rise of 1.5C above pre-industrial levels by 2100.”

Under the new proposal, the “framework’s ambition will be broadened” to include all net zero pathways aligned with Paris agreement temperature goals, including those aiming for “well below 2C,” according to the briefing documents.

At the current pace of decarbonization, the United Nations has warned that the world is on course for closer to 3C of warming. And within that context, it’s particularly notable that more than 100 banks have set 1.5C-aligned sectoral emissions reductions goals, Bashir said.

Still, greater flexibility on target-setting is needed because the pace of decarbonization varies widely across countries and industries, he said.

The new look NZBA will put a greater emphasis on helping its members support their clients in the low-carbon transition. It also will offer technical guidance on issues such as avoided emissions and identify and develop strategies that address barriers to financing for certain green technologies, according to the briefing documents.

“We’re halfway through the critical decade for action on climate, and we need all sectors, including banking and finance, to commit to moving the needle on emissions reductions,” Bashir said.

The biggest European banks, including BNP Paribas SA, HSBC Holdings Plc and UBS Group AG, are members of NZBA, and so are Barclays Plc, Deutsche Bank AG and Standard Chartered Plc.

A BNP spokesperson said the bank is “pursuing our strategy to support the energy transition, regardless of how the various net zero alliances evolve.”

Spokespeople for HSBC and StanChart declined to comment on whether they endorsed NZBA’s proposal, while the other banks didn’t respond to requests for comment.

Triodos Bank, based in the Netherlands, said Tuesday in a statement that it’s leaving NZBA because of the members’ vote to lower the alliance’s climate ambition and set less strict requirements.

With assistance from Natasha White and Sarah Jacob.

Alastair Marsh, Bloomberg News

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