This year has been a rough year for climate action. The US left the Paris Agreement and has weakened key environmental protections. In Europe and the UK, a rising chorus seems to be challenging the net-zero consensus. Several financial institutions have pulled out of major net-zero alliances, raising questions about the durability of private sector commitments.
Meanwhile, the planet has continued to warm. This year is on track to be the hottest ever recorded. Los Angeles has faced devastating wildfires, Texas has endured catastrophic flooding, and climate-driven disasters are worsening around the world. The impacts are accelerating, even as the political response shows signs of stalling.
In the face of all this turbulence, financial decarbonisation alliances are even more essential. I had the good fortune to work with both UNEP FI and the Glasgow Financial Alliance for Net Zero (GFANZ) as the first alliances were being set up. These alliances, including the Net-Zero Banking Alliance (NZBA) and others, continue to play a vital role in accelerating the transition and managing climate risk in the financial sector.
Alliances offer structure where policy is uncertain, alignment where markets are fragmented, and momentum at a time when backsliding is all too easy. They help direct capital toward climate solutions, raise expectations for corporate transition plans, and equip financial actors with the tools they need to assess and respond to growing climate risks.
NZBA is a bank-led, UN-convened coalition of more than 100 banks from across the globe. Its membership spans regions and business models, from development banks in the Global South to multinational financial giants in Europe. What unites them is a shared commitment to independently align their lending and investment portfolios with the goals of the Paris Agreement.
Since its launch in 2021, the NZBA has helped define what credible climate alignment looks like for the banking sector. Member institutions have committed to set science-based emissions reduction targets, develop and disclose transition plans, and report regularly on their progress. The alliance has produced common frameworks, sectoral guidance and methodological updates that give banks a practical foundation for aligning capital with climate goals.
Alliances like NZBA provide real value to their members by creating structure, reducing duplication and supporting faster progress. Each entity in the alliance joins voluntarily and is seeking to advance commitments that they have already made.
Developing net-zero targets, methodologies, and transition strategies is complex and resource-intensive. Through shared frameworks and workstreams, NZBA allows institutions to learn from emerging practices and experiences. This learning lowers costs and accelerates progress.
As financial institutions navigate the complexity of decarbonisation pathways, a changing world, and competing stakeholder demands, NZBA offers a foundation rooted in evidence and peer best practices. Its ongoing work programme supports members to translate ambition into action by helping them build robust transition plans, engage with high-emitting clients, and manage their exposure to transition and physical climate risks.
The influence of alliances like NZBA extends beyond individual institutions. By clarifying expectations across the financial sector, they help shape the policy environment, inform regulatory frameworks and guide the development of climate disclosure standards. They also send strong signals to the market, boosting the flow of capital toward clean energy, sustainable and resilient infrastructure, and low-carbon technologies.
This mobilisation is essential. According to the IEA, clean energy investment needs to more than double by 2030 to stay on track for net zero. Financial alliances support that goal by giving institutions the confidence and tools to scale up green finance while identifying and managing exposures to high-carbon assets.
Amid mounting climate impacts and increasing policy uncertainty, financial institutions are navigating an increasingly volatile world. To successfully navigate that future, finance needs transparency, a clear vision and the ability to learn and adapt quickly. Decarbonisation alliances empower financial actors to do these things effectively. While these alliances will continue to evolve, we should acknowledge the value they are already providing across the financial sector.
David Carlin is the founder of DA Carlin & Company
