Canadian financial institutions withdraw from New Zealand Bankers' Association prior to Trump's inaugration
In a recent development, four Canadian banks - The Bank of Montreal (BMO), National Bank of Canada, Toronto-Dominion Bank (TD), and the Canadian Imperial Bank of Commerce (CIBC) - have decided to leave the Net Zero Banking Alliance (NZBA). This departure comes amid a broader global trend of major banks exiting the coalition, primarily due to political and legal pressures, particularly from U.S. Republican politicians [1][2][4].
These political pressures have raised concerns about potential legal risks and exclusion from state business because of participation in climate-focused alliances. As a result, the NZBA, which is part of the Glasgow Financial Alliance for Net Zero (GFANZ), an umbrella organization of net-zero coalitions, has seen a significant decrease in membership, making it less able to support transition efforts [1][2][4].
Despite their exit from the NZBA, these banks have reaffirmed their commitment to climate goals. For instance, Barclays, another bank that exited the alliance, has stated it remains committed to its net zero ambitions and climate finance targets [1][5]. This suggests that while their formal participation in the NZBA has ended, their broader commitments to addressing climate change and financing sustainability transitions persist. However, the specific frameworks and external accountability mechanisms they follow may now differ.
Jeanne Martin, head of the Banking Programme at campaign group Share Action, has cautioned that banks need to match their words with action on climate. She emphasizes the need for regulators to step up with robust regulation to ensure banks are playing their part in building a sustainable future. Martin suggests setting clear strategies to phase out financing of dirty activities like fossil fuels and ramp up financing of sustainable activities [3].
This trend of banks leaving climate coalitions amid political and regulatory pushback indicates challenges for global climate coalitions dealing with finance sector engagement. However, it does not necessarily mean that individual banks are abandoning their climate-related goals. On the contrary, banks like BMO, TD Bank, and CIBC continue to pursue climate-related goals independently [6].
It is important to note that these five banks - RBC, TD Bank, Scotiabank, BMO, and CIBC - are among the largest financiers of the fossil fuel industry [7]. Between 2020 and 2021, the five banks increased their lending to the oil and gas sector from $62 billion to $104 billion [8]. BMO, for example, has a substantial presence in the US market, bolstered by its 2023 acquisition of BNP Paribas SA's US banking division, and now operates more than 1,000 branches across the US [9].
Recently, BMO CEO Darryl White hinted at the possibility of exiting the climate coalition at an investor event [10]. Martin's comments were made in the latest Share Action podcast titled "NZI with Mona: Jeanne Martin on the NZBA exits" [11]. The banks' departures from the NZBA occurred just days before Donald Trump assumed office for a second term [12].
Earlier this month, GFANZ announced a significant overhaul of its membership expectations, effectively removing the requirement for participating banks to commit to net-zero targets [13]. This could potentially lead to less coordinated or standardized climate action across the banking sector and potentially less external scrutiny from this UN-backed alliance.
In conclusion, the departure of major banks from the Net Zero Banking Alliance highlights the complexities of engaging the finance sector in climate action amid political and regulatory pressures. While individual banks may choose to leave climate coalitions, their commitment to climate goals and sustainability transitions remains a critical factor in the fight against climate change.
The departure of the four Canadian banks from the Net Zero Banking Alliance (NZBA) raises questions about the potential impact of political pressures on banking sector engagement in climate-focused initiatives. These banks' exits from NZBA do not necessarily signify abandonment of their climate-related objectives; instead, they may pursue these goals independently.
Despite the banks' departure from the NZBA, they continue to demonstrate a commitment to addressing climate change and financing sustainability transitions. For instance, Barclays, another bank that exited the alliance, has maintained its dedication to net-zero ambitions and climate finance targets.