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Net Zero Banking Alliance Abandons Climate Goal
Tim Mohin
April 18, 2025
NZBA abandons 1.5°C
Maritime becomes the first sector to implement a sector-wide carbon price
California contractor climate reporting rule aims to replace a federal rule
State vs. Federal climate showdown heating up
Trump’s policies may hurt the fossil industry
Coal rescue plan unlikely to succeed
SEC approves the US's first sustainability stock market
Simplification plan for EU sustainability reporting standards rejected
This week, the Net Zero Banking Alliance (NZBA) voted to drop the requirement for its members to align their emissions reductions with 1.5°C. The move is an attempt to halt the hemorrhaging of members over the last year. Under new guidance, members will now be ‘encouraged’ to meet the less stringent goal of limiting global warming to well below 2°C while striving for 1.5°C in line with the Paris Agreement. With 80% of the NZBA’s members voting, 90% voted in favor of relaxing the goals.
The main reason cited for the change was that the wider economy is falling short on the transition to a low-carbon economy. Shargiil Bashir, of First Abu Dhabi Bank and NZBA chair, said, “The knowledge we had in 2021 on what was achievable…has been very different from where we are today.”
Not all of the NZBA members were happy with the move: Triodos, an ethical bank from the Netherlands, with operations across the EU, left the group, stating “the shift from strict requirements to more lenient guidance significantly undermines the effectiveness of the NZBA.”
A new report suggests that increased investment in fossil fuels is the reason for the defections from a similar group - the Net Zero Asset Managers Initiative (NZAMI) - which led to suspending its activities. Others have concluded that banks and other financial institutions have used the current backlash to distance themselves from what is likely an unachievable goal.
While financial institutions distance themselves from climate groups, reports suggest that they are also preparing for the worst effects of climate change. Tucked into a research report on the future of air conditioning stocks, Morgan Stanley said, "we now expect a 3°C world" - which could double growth for the cooling market every year until 2030. It seems that the focus has shifted from how to fight climate change to how to do business in a hotter world.
Landmark Climate Agreement for Shipping
The maritime industry became the first to agree to a sector-wide price on carbon. The International Maritime Organization (IMO) reached a deal despite the US removing itself from the proceedings and threatening reciprocal measures if its ships are levied with the agreed carbon tax.
The agreement came from the Marine Environment Protection Committee during its 83rd session. Even without the US, 63 countries voted in favor, while 16 voted against and 24 abstained. It will be formally adopted in October and enter into force in 2028, requiring ships over 5,000 gross tons to use less carbon-intensive fuels or face fines of up to $380 per tonne of CO2 equivalent.
Though a major step, it won’t be enough for the IMO to reach its net zero by 2050 goal. Critics complained that it’s a far cry from a clear carbon price on every tonne of emissions. Faïg Abbasov of Transport and Environment said, “This deal is not fit for purpose to deliver IMO’s own 2050 net zero and intermediate targets… but the IMO deal creates a momentum for alternative marine fuels.”
California Procurement Rule
One of the first actions of the Trump administration was to reverse a rule requiring Federal suppliers to report emissions and set climate targets. Now, California has picked up that mantle with the California Contractor Climate Transparency Act (SB 755).
The bill, which is currently 25% of the way through the legislative process, is set for a Senate hearing on April 30th. It will require the California Air Resources Board (CARB) to have California state contractors report emissions and climate risks by January 1st, 2027. Large contractors (>$25 million in state contracts) will have to report Scope 1, 2, and 3 emissions and climate risks. Significant contractors (Between $5 and $25 million in state contracts) will have to report only Scope 1 and 2 emissions.
States vs. Trump Climate Showdown
California Governor Gavin Newsom
As California and other states aim to fill the climate policy gap left by federal rollbacks, the stage is set for a showdown with the Trump Administration.
A new executive order signed last week took aim at states' climate rules. Critics argued hypocrisy - pointing out that the administration is trampling states’ rights for environmental issues while defending them for other issues. Former White House Climate Advisor Gina McCarthy said, “We are not an autocracy and we will not allow this president to turn us into one. States and governors have rights.”
Last week’s order, which directly mentioned California’s Cap and Trade rule, spurred California Governor Gavin Newsom to “double down” on the program in the “face of federal threats.”
Trade War Threatens US Fossil Fuels
Trump’s trade policies are risking his ‘energy dominance’ plan, leaving oil and gas executives unnerved. One executive who donated to Trump’s campaign said anonymously, “Trump’s tariff gamble places energy dominance at a crossroads.”
The International Energy Agency (IEA) released a report this week, downgrading expected demand for crude oil by a third, citing Trump’s trade war. With banks predicting the price of a barrel of crude to hover around $60 over the next couple of years, the IEA revised its forecasts downward for US oil production growth this year.
Coal Rescue Plan Unlikely to Succeed
Trump’s plan to revive the coal industry is also at odds with the US economy since more Americans are employed in wind and solar than coal by approximately 10 to 1 - a gap that is growing by more than 5% annually. Also, the states that rely on coal have higher energy bills, more health issues, and higher power plant failures due to aging infrastructure.
Holly Bender, chief program officer at the Sierra Club, said “...Trump is trying to put his finger on the scale to keep coal open. But these are pieces of infrastructure that are at the end of their useful life.” Dan Reicher, an assistant energy secretary in the Clinton administration, added: “There are a variety of forces at work that don’t paint a very bright future for coal.”
SEC Launches Green Stock Exchange
This week, the US Securities and Exchange Commission (SEC) approved an application from the Green Impact Exchange (GIX), enabling GIX to launch the country’s first sustainability-focused stock market.
The market will be dedicated to listing companies that follow guidelines on setting goals, measuring progress, and reducing their environmental impacts. GIX expects to begin trading in early 2026, and GIX CEO Dan Labovitz said, “Today’s approval order is an important step forward for sustainability-minded investors and companies. We are grateful to the SEC Commissioners and staff for their thoughtful engagement throughout the application process.”
EU Sustainability Simplification Plan Rejected
The European Financial Reporting Advisory Group (EFRAG) was tasked with simplifying the European Sustainability Reporting Standards (ESRS), as part of the EU’s Omnibus Directive. Under the fast-tracked mandate, the simplified standards are expected by October 31st.
This week, the Sustainability Standards Board rejected the simplification work plan, claiming that it lacks a detailed implementation plan and adequate means for public comment. While the work plan gets sorted, EFRAG has already launched a public call for input on the ESRS revisions, open until May 8th.
Notably, this week the EU Commission issued its proposed revisions for the Corporate Sustainability Reporting Directive, the EU Taxonomy, and the Corporate Sustainability Due Diligence Directive.
Last Word
At a time fraught with chaos and despair, listen to the words of John Elkington, a fifty-year veteran and founder of the sustainable business movement. He compares the times we are in today to his parents' time serving in World War II. Despite facing the most existential threat, they felt it was the best time of their lives because “everyone was working together with a common purpose.” John applies this moving sentiment to today’s sustainability movement. Fight on.
The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.
Other Notable News:
EU Sustainability Rules
Supply Chain Sustainability
Sustainable Business
Trump 2.0
Notable Podcasts:
This week’s episode of Zero: The Climate Race from Bloomberg asks how the financial system can work for the climate, not against it. It features an interview with Avinash Persaud, climate advisor to the President of the Inter-American Development Bank, to discuss how developing nations can secure a larger share of the trillions invested in the energy transition.
In this week’s episode of Outrage and Optimism, the hosts have a timely discussion on Trump and tariffs. They are also joined by Al Gore and France’s Special Representative for COP21, Laurence Tubiana, to consider the impact of money in politics and the importance of staying optimistic in uncertain times.
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