The end of an era for climate finance governance
The Net-Zero Banking Alliance (NZBA), the industry-led initiative once championed by former U.N. climate envoy Mark Carney, has ceased operations after losing most of its membership. The organization, launched in April 2021, effectively shut down on Friday, four years after its public debut as a collective pledge by banks to align lending with net-zero emissions.
How the NZBA came to be
Created ahead of the COP26 climate summit, the NZBA brought together 63 financial institutions from 32 countries with roughly US$40 trillion in assets. In Canada, the group began with Vancouver City Savings Credit Union as the lone local member; major Canadian banks would follow in October 2021—RBC, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada—joining in a show of support for climate-aligned lending.
Throughout its existence, the NZBA published more than a dozen reports and provided a framework for banks to develop climate-related business strategies, with the aim of setting more than 500 sectoral net-zero targets across its members. The scale of participation and the breadth of its guidance helped many lenders articulate a path toward decarbonization in lending portfolios.
The exodus that felled the alliance
In late 2024, as political headwinds intensified in parts of the United States, the alliance saw its largest American members exit. By the start of this year, Canada’s largest lenders had followed suit, departing from the coalition as part of a broader retreat from climate-focused voluntary initiatives. The Net Zero Asset Managers Initiative (NZAMI), the investor sister group to the NZBA, also suspended operations in January after its biggest member, BlackRock, left, illustrating a broader retreat from voluntary net-zero commitments in financial services.
In the wake of the departures, some of the remaining voices within Canada’s banking sector argued that the NZBA’s governance framework may no longer have been the best mechanism for achieving climate goals. RBC and BMO chief executives publicly signaled a shift away from the NZBA’s oversight-and-reporting model, even as they reaffirmed a continued commitment to climate transition through other means.
“If our countries have an objective to get to a certain point, we will be part of that,” said RBC CEO Dave McKay at a January conference, noting that leaving the NZBA doesn’t equate to abandoning net-zero commitments. “Pulling out of NZBA hypothetically doesn’t lead to non-commitment to net-zero climate change. It just means that mechanism… maybe that is not the right mechanism to do it.”
Similarly, BMO’s Darryl White insisted the bank remained committed to climate transition but emphasized a Canadian obligation to support legacy energy customers—an acknowledgment that the approach to decarbonization needed to evolve beyond a single alliance’s framework. Both executives stressed that the underlying goals of net-zero through prudent lending remained intact, but the chosen vehicle for governance and reporting did not.
What comes next for climate finance?
The closure of the NZBA and the winding down of NZAMI leave climate-aligned finance navigating a more fragmented governance landscape. While some observers argue that voluntary coalitions can spark best practices and cross-border collaboration, others warn that without robust, enforceable standards, progress risks stalling or slowing as political and economic headwinds change. Analysts will watch closely to see whether financial institutions pivot toward bilateral commitments, industry led frameworks, or tighter regulatory guidance from national and supranational bodies.
For Canada, the exit coincides with ongoing debates about the country’s own climate policy instruments, including the effectiveness of carbon pricing and how banks balance decarbonization with the realities of energy customers and regional economic interests. The political climate surrounding climate policy globaly appears to be shifting, and the banking sector is recalibrating its approach to climate risk, governance, and disclosure.
Bottom line
The NZBA’s shutdown signals a turning point in climate finance governance. While the ambition to reach net-zero remains, the methods to coordinate industry-wide action are now up for renegotiation—leaving banks to decide, with or without international coalitions, how to translate climate commitments into concrete, financially sound lending practices.
