Global banking group makes controversial move to scrap crucial rule for members: 'Holds significant repercussions'

A United Nations finance initiative has removed its 1.5 degrees Celsius (2.7 degrees Fahrenheit) climate requirement for financial institutions, according to Sustainable Views.

What's happening?

Following a year-long review and a member vote, the UN's Net-Zero Banking Alliance (NZBA) recently published new guidance for banks. It includes removing a major emissions target for members.

To date, the 120-member banks were committed to aligning their activities to keeping global warming under 2.7 degrees Fahrenheit from pre-industrial levels, in line with the Paris Agreement targets. This mostly meant not lending money to companies that use dirty energy, as they contribute the most to atmospheric pollution.

Many banks have recently left the NZBA. With the new Trump administration, there's a resurgence in pro-oil and gas policies, which have many American banks pushing back against the NZBA's targets.

The new changes refocus the NZBA so that the organization is geared to support member institutions' individual climate goals. The NZBA said that there was "a wider range of net-zero pathways that align with the temperature goals of the Paris Agreement to limit global temperature rise to well below 2°C and to strive for 1.5°C."

SBTi chief technical officer Alberto Carrillo Pineda told Sustainable Views that "the window to keep heating within 1.5C is rapidly closing, every fraction of a degree that we tip over 1.5C holds significant repercussions."

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Why is climate finance important?

Stemming the flow of funding to oil and gas projects is vital to reducing atmospheric pollution and the catastrophic weather patterns it produces. While the NZBA is mostly targeting private financing of these industries, public funding continues to prop up many polluting industries.

Incentives and legislation can help shift that money from oil and gas into green investment. Unfortunately, one report suggests that investments in green tech have been declining sharply, while another showed trillions continue to go into oil and gas. As for the end result, we're well on our way to blowing past the temperature target.

What's being done about climate finance?

The NZBA said it remains a supportive body to banks willing to engage in reducing pollution.

"We are halfway through the critical decade for action on climate, and we need all sectors, including banking and finance, to commit to moving the needle on emissions reductions," said NZBA Chief Sustainability Officer Shargiil Bashir. "As the largest global initiative specifically focused on supporting climate mitigation action by banks, NZBA is uniquely positioned to provide practical support to banks navigating the net-zero transition. I welcome the decision by members to progress NZBA into its new chapter."