Goldman Sachs recently announced it would leave the Net Zero Banking Alliance (NZBA), in a move criticized by groups as “backsliding” on their climate commitments. Morgan Stanley stated in a recent update that it was softening its commitment to its 1.5˚C-aligned targets, replacing them with emissions reduction goals calibrated to a temperature rise range with an upper limit of 1.7˚C instead of 1.5˚C. As every tenth of a degree of temperature rise matters, and breaching a 1.5˚C threshold would carry a staggering loss of life and immense damage to ecosystems and the global economy, revising its targets comes at an enormous cost.

Morgan Stanley’s update failed to acknowledge its own role in continuing to fuel climate change and the rise in global temperatures, as a major funder of the oil, gas and coal industries and one of the few banks which increased its financing to the sector last year.

Groups behind the letter are demanding that the NZBA “stand firm on foundational requirements that its members align their target setting to limiting global average temperature rise to 1.5˚C and develop credible, science-based plans for achieving Net Zero targets, even in the face of bank exits and threats of withdrawal”.

It adds: “The alliance must not seek to appease or accommodate potential defectors or remain complacent when its members dilute their targets, as doing so undermines the very purpose of the coalition and jeopardizes global climate goals”.

It calls on the NZBA and the bodies overseeing it, the Glasgow Financial Alliance for Net Zero and the United Nations Environment Programme Finance Initiative, to provide information on how they plan to deal with backsliding and ensure NZBA organizations will maintain net-zero targets in line with a 1.5ºC climate scenario.

The groups behind the letter have raised concerns that, following the US federal elections and a disappointing outcome at COP29, major banks, regulators and voluntary initiatives like NZBA could reduce the levels of ambition in their climate action below what is required to put the world on a 1.5˚C-aligned path. The groups include organizations tracking banks’ financing activities and pushing banks to stop funding highly-polluting projects and companies around the world, including Stand.earth, Rainforest Action Network, Sierra Club, BankTrack, Texas Campaign for the Environment, and Amazon Watch. 

Read the full letter here

The escalated steps from Goldman Sachs and Morgan Stanley come after a string of worrying moves that US banks have made to weaken their climate targets. Bank of America lifted a ban on funding coal projects and Arctic oil and gas; JPMorgan Chase has introduced an “energy mix” for calculating its financed emissions, which will include renewable energy and make it harder to assess. As nations have not reevaluated the terms of the Paris Agreement, these moves by banks are incompatible with emissions reduction scenarios put forward by the IEA, the world’s foremost energy experts, for reaching net-zero emissions by 2050. 

In the meantime, progress has been made by other NZBA banks such as ING’s announcement to end project financing for LNG export terminals, and moves by Crédit Agricole and BNP Paribas to rule out involvement in bond deals for oil and gas companies. In September, Amalgamated Bank, Triodos Bank and Vancity, endorsed the Fossil Fuel Non-Proliferation Treaty Initiative. The NZBA should build upon its more ambitious members’ announcement to strengthen the credibility of the alliance.

Quotes

“Goldman Sachs’ announcement is the latest in a wave of shameful backsliding from Wall Street on much-needed climate ambition. As we close out the hottest year on record, banks are revealing their true nature: abandoning global climate targets and communities around the world whose lives are being upended by unnatural disasters. The Net Zero Banking Alliance cannot allow its members to stall climate progress.” – Hannah Saggau, Senior Climate Finance Campaigner, Stand.earth

“Goldman Sachs’ exit from the Net Zero Banking Alliance (NZBA) is a profoundly disappointing move that casts serious doubt on the bank’s commitment to climate action. However, this decision will not absolve Goldman Sachs of its responsibility to meet emissions reduction targets and align its operations with a 1.5˚C pathway. The NZBA must not capitulate to defecting members or members who seek to weaken their climate commitments and must, instead, steadfastly uphold its standards, ensuring that all members commit to developing credible transition plans to achieve net zero by or before mid-century, while keeping global temperature rise to 1.5˚C. Although NZBA membership is not the only or even the most important indicator of a bank’s decarbonization efforts, any institution that chooses to follow Goldman Sachs in exiting the alliance will be perceived as acting in bad faith, distancing itself from the urgent climate action needed to confront this crisis.” – Allison Fajans-Turner, Bank Engagement and Policy Lead, Rainforest Action Network 

“Despite recent backsliding by some Wall Street banks, the only credible way for financial institutions to meet their net-zero commitments and align with the Paris Agreement is to rapidly phase out fossil fuel financing and scale up funding for clean energy solutions. Membership in voluntary alliances is not the true measure of climate progress; what matters is the strength of a bank’s policies, clear targets, and transparent adherence to them. The enormous costs of not following through will ultimately fall upon our global economy and financial markets, so it’s up to banks’ regulators, shareholders, and clients to hold them accountable.” – Ben Cushing, Campaign Director, Sierra Club

“For a long time, the NZBA has not taken concrete actions against laggards, fearing that they might leave the alliance. However, Goldman Sachs’ announcement shows that members can withdraw from the NZBA anyway. Therefore, the NZBA should live up to its commitment and require that its members align their activities with a 1.5ºC climate scenario. It has a unique opportunity to mark the occasion, forbidding Morgan Stanley to use a 1.7ºC climate scenario to set its decarbonization targets.” – Quentin Aubineau, Policy Analyst Banks and Climate, BankTrack

This press release was originally posted on Stand.earth's website.