By Lily Andrews, Environmental Research Analyst
- Net-Zero financial alliances were already weak and ineffective, lacking enforcement and allowing greenwashing.
- The alliances permitted financial institutions to only pledge a fraction of their assets to goals and lacked strong milestones to climate action.
- Their collapse creates an opportunity for stronger climate strategies through investor activism and more stringent regulation.
You can be pro-climate and still recognise their failings
The domino-effect of a regulatory environment hostile to climate action and the subsequent withdrawal of large US banks and asset managers from Net-Zero Financial Alliances is fuelling widespread climate concerns. But just how significant are these departures?
Sustainable investing, and more specifically environmental investing, is at the heart of what we do. But we have long resisted the pressure to sign up to these alliances. As quantitative investors, Osmosis puts little value on targets or pledges. However well meaning, we believe action over intent is needed to drive progress. Unfulfilled goals without measurable milestones have unwittingly enabled greenwashing and provided an easy ‘pass’ without facilitating genuine climate action.
The start of 2025 has been marked by a turbulent global political environment, a quick shift to right-leaning policies and an alarming scale back of corporate climate action in the US, but we believe economic logic will prevail. Climate risk is a financial risk and the need to protect long term shareholder value means environmental issues will remain firmly on the corporate agenda. We believe the dissolution of these alliances could provide the opportunity to drive stronger, more enforceable and effective climate action in the future.
The Dissolution of Net-Zero Alliances
Established at COP26 in 2021, the Glasgow Financial Alliance for Net Zero (GFANZ) is a global coalition of financial institutions which aims to accelerate the net-zero transition by 2050. Prior to 2025, the alliance represented major financial institutions and included Sub-Groups such as the Net Zero Banking Alliance (NZBA) and Net Zero Asset Managers Initiative (NZAM). As of January 2025, however, NZAM has suspended its activities following the withdrawal of major participants, like BlackRock, and the NZBA has been significantly weakened as major players have withdrawn. This withdrawal included six major US banks, J.P. Morgan, Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs, followed by Canadian and UK based financial institutes like the Bank of Montreal and Baillie Gifford[i][ii] [iii] [iv]. Reasons for the departures have varied but political and legal pressures are widely seen as the primary cause.
Despite leaving the NZBA, American banks like JP Morgan Chase and Citigroup have reconfirmed their commitment to GFANZ [v] [vi]. Whilst GFANZ remains active, it is significantly weakened after the collapse of NZAM and the withdrawal of major financial institutions from the NZBA. And although GFANZ emphasises the importance of financial institutions establishing credible net-zero transition plans, the alliance focuses on loose, voluntary “best practices” rather than strict low-carbon commitments. It is notable that it has abandoned the requirement that members be aligned to the Paris agreement as Trump enters his second term[vii] [viii].
The withdrawal from these initiatives is not as severe as it seems
Prior to their apparent and impending collapse, these alliances were already widely criticised as weak and ineffective, not just by right-wing anti-ESG opponents, but also by pro-climate advocates who voiced concerns just as loudly. At the core of the alliances’ problems was their lack of enforcement, which enabled greenwashing rather than driving meaningful progress.
Inadequate pledges and disclosure
Both the NZBA and NZAM required financial institutions to pledge a specific proportion of their assets to net-zero. This weakened alliance goals, as it allowed some institutions to pledge just a fraction of their assets in their net-zero goals. In 2021 for example, a report by Reclaim Finance and the Sunrise Project found that 65% of assets managed by 43 financial institutions who were signatories to NZAM would not be aligned with net zero by 2050[ix], with BlackRock facing criticism for the low portion of its AUM in its net-zero pledges prior to its departure[x].
The alliances were further diminished by allowing banks to disclose emission targets solely on an intensity basis, contradicting their net-zero commitments and failing to drive meaningful reductions. In the 2023 AGM season, shareholder proposals to institutions such as Goldman Sachs, Royal Bank of Canada, JP Morgan and Bank of America called for absolute greenhouse gas reduction emissions and targets[xi]. These financial institutions repeatedly argued that emissions intensity targets should be utilised to allow better sector comparisons, despite failing to provide shareholders with an accurate perspective of a banks’ progress, a disclosure requirement that was laid out by the alliance. Intensity emission values are based on an entities’ revenue or other unit of production, whereas absolute emissions are the raw figure, usually disclosed in tonnes of carbon dioxide equivalent. Intensity is therefore not a comprehensive indicator of progress, as the metric can decrease whilst absolute emissions simultaneously continue to increase[xii]. These proposals show that shareholder frustration was not only towards banks for failing to live up to the commitments of the NZBA, but may also suggest that they did not believe that NZBA itself aligns with the principles of the Paris Agreement.
Subpar transition planning
In addition to these shortcomings, both the NZBA and NZAM rely on voluntary commitments with no penalties for failure to meet climate targets. This means banks and asset managers continued to finance fossil fuels unscathed and without proper transition planning, undermining the credibility of net-zero pledges. A 2023 report by Reclaim Finance, found that ‘the 56 top banks in the NZBA provided at least US$269 billion to 102 of the major fossil fuel expanders’ and ‘the 58 largest asset managers in NZAM held at least US$847 billion of stocks and bonds in 201 fossil fuel expanders’[xiii]. Worryingly, this illustrates how major signatories of such alliances were still investing heavily in dirty fuel projects, all the while claiming to make strides to net-zero alignment.
Whilst the transition to a sustainable economy undoubtedly requires energy, the key problem with these continued fossil fuel expansions lies with how many financial institutions committed to 2050 net-zero goals without setting short-term measurable milestones and sector specific targets[xiv] [xv]. As You Sow, a shareholder action NGO, presented a wave of resolutions in 2023 to former NZBA members like Goldman Sachs, Wells Fargo, Citigroup, Morgan Stanley, JP Morgan and Bank of America calling into question their emission targets and transition plans, or lack thereof, and lack of alignment with a Net Zero pathway[xvi]. It can therefore be suggested that rather than comprehensively committing to overarching alliance goals and efforts, banks were using their signatories as a blatant greenwashing strategy.
An Inflection Point?
The early 2025 collapse of initiatives like the NZAM and the weakening of GFANZ have initially been seen as major setbacks for climate finance. However, these alliances were already flawed, which is why Osmosis never expressed alignment with them. Crucially, their dissolution creates an opening for stronger, more enforceable climate action and the failure of voluntary initiatives underscores the urgent need for alternative, more effective approaches.
Rather than relying on alliances with weak enforcement, the financial sector now has the opportunity to establish industry-led coalition with rigorous entry requirements, binding commitments and real accountability, all which signify actual climate leadership. Simultaneously, investor and shareholder activism, coupled with stronger financial regulation in climate-conscious jurisdictions has the potential to drive meaningful change.
Past successes illustrate the power of investor action. Shareholder pressure has already pushed HSBC to phase out the financing of coal-fired power and thermal coal mining in the EU and the OECD by 2030, and other regions by 2040[xvii]. Similarly, shareholder resolutions have lead Chevron to increase methane emission transparency [xviii]. As anti-ESG sentiment increases, we expect to see an increase in climate-positive shareholder resolutions and lawsuits as pushback. The Sierra Club, the US’s largest environmental group, filed some 300 during Trump’s last term and is gearing up for escalation during the current administration[xix].
Beyond this, governments and jurisdictions like the EU and UK have the opportunity to ramp up climate action through regulation rather than weak, voluntary and unenforceable pledges. Upcoming and present regulations relating to mandatory climate disclosure such as the EU’s CSRD, carbon taxes, anti-greenwashing legislation and potential fossil fuel restrictions are just some of the actions these governments can do to maintain climate momentum during an unstable geopolitical climate. A recent UK court ruling declared two new Scottish oil and gas fields were granted unlawfully and that their owners would need to seek new approval prior to production[xx]. Following this, ministers are in the process of deciding new guidance for fossil fuel extraction, meaning thirteen more oil and gas licences could also be cancelled[xxi]. It will be interesting to see how similar legislation and rulings develop to prevent unfettered fossil fuel expansion.
Rather than a setback, the unravelling of net zero financial alliances should be seen as an inflection point. It is an opportunity to build stronger coalitions and promote investor and regulatory action that drives genuine climate progress.
[i] https://www.theguardian.com/business/2025/jan/08/us-banks-quit-net-zero-alliance-before-trump-inauguration#:~:text=against%20climate%20action.-,JP%20Morgan%20is%20the%20latest%20to%20withdraw%20from%20the%20UN,since%20the%20start%20of%20December.
[ii] https://www.bailliegifford.com/en/uk/individual-investors/literature-library/corporate-governance/membership-update-november-2024/
[iii] https://financialpost.com/fp-finance/banking/bmo-first-canadian-bank-leave-un-climate-alliance#:~:text=%E2%80%9CBMO%20is%20no%20longer%20a,to%20a%20net%2Dzero%20world.
[iv] https://www.esgtoday.com/net-zero-investor-coalition-hits-pause-after-blackrock-exit/
[v] https://www.energyconnects.com/news/renewables/2025/january/jpmorgan-quits-climate-finance-group-following-citi-bofa/
[vi] https://www.citigroup.com/global/news/perspective/2024/statement-glasgow-financial-alliance-net-zero-banking-alliance
[vii] https://www.gfanzero.com/our-work/?utm_source
[viii] https://www.theguardian.com/business/2025/jan/20/global-financial-sector-dropping-key-green-pledges-as-trump-takes-office
[ix] https://reclaimfinance.org/site/en/2021/11/01/nzami-members-ignore-65-of-their-assets/
[x] https://www.thetimes.com/business-money/companies/article/blackrock-quits-net-zero-alliance-under-pressure-from-republicans-l5qz220qv
[xi] https://comptroller.nyc.gov/newsroom/absolute-ghg-emissions-reduction-proposal/
[xii] https://ccsi.columbia.edu/news/corporate-net-zero-pledges-bad-and-ugly
[xiii] https://reclaimfinance.org/site/wp-content/uploads/2023/01/Throwing-fuel-on-the-fire-GFANZ-financing-of-fossil-fuel-expansion.pdf
[xiv] https://reclaimfinance.org/site/en/2024/09/19/banks-must-overhaul-climate-targets-to-deliver-emissions-cuts-new-analysis-finds/#:~:text=Bank%20targets%20are%20a%20morass,not%20clean%20up%20their%20act.
[xv] https://reclaimfinance.org/site/en/2022/11/15/nzba-after-18-months-a-muddle-of-low-ambition-non-comparable-targets/
[xvi] https://www.asyousow.org/resolutions/tag/Climate+Transition
[xvii] https://shareaction.org/news/hsbc-sends-shockwaves-as-it-commits-to-end-coal-financing
[xviii] https://www.chevron.com/newsroom/2022/q4/chevron-publishes-methane-report#:~:text=This%20report%20includes%20information%20that,Annual%20Stockholders%20Meeting%20in%20May.
[xix] https://www.forbes.com/sites/amyfeldman/2024/11/18/clean-energys-cost-edge-could-trump-drill-baby-drill/
[xx] https://www.bbc.co.uk/news/articles/c3e1pw7npklo
[xxi] Thirteen more oil and gas licences could be cancelled after Rosebank court ruling | Oil | The Guardian
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