Wavering green banks give NZBA temporary reprieve

Triodos and Ecology Building Society will remain members of GFANZ alliance despite threats of COP departure.

Illustrations of US dollars

Two banks which had threatened to leave the Net Zero Banking Alliance (NZBA) if ambition had not been raised have told Responsible Investor that they will remain members for now in order to better influence the discussions.

Triodos said in February that it would “reconsider” its membership of the NZBA if tangible improvements had not been made to its guidelines for target-setting by COP28.

The Dutch lender called for the guidelines to include criteria for phasing down and out all unabated fossil fuels and restrictions on the financing of new fossil assets. It also criticised the continued financing of fossil fuel expansion by some NZBA members.

Similarly the CEO of the UK’s Ecology Building Society, Gareth Griffiths, told Bloomberg in February that it would consider walking away from the GFANZ alliance if the rules around fossil fuel funding were not tightened.

However, both banks have said they plan to remain members of the NZBA for now.

A spokesperson for Triodos said there was no update on its membership at the moment. “The revision of the target-setting guidelines is ongoing and we are awaiting more information on the future direction of NZBA before we make any decisions,” they said.

They added that Triodos was committed to using its influence internally to strengthen the guidelines.

Ecology’s Griffiths told RI that the building society “continues to actively engage with NZBA on the criteria we set out in February”.

“We welcome the positive steps taken since then, and we value the fact all members of the group have an equal voice to contribute to and influence the debate,” he said. “We will be responding during the consultation for the updated guidelines and await the outcome of the members’ vote on the final document next year.”

Both banks are members of the Global Alliance for Banking on Values. In February, fellow member GLS Bank became the only NZBA member to leave the GFANZ alliance, when it walked away in protest at the continued funding of fossil fuel projects by larger members.

Getting through the worst

Ivan Frishberg, CSO at Amalgamated Bank and a member of the NZBA steering group, told Responsible Investor that the progress made by banks thus far on target-setting “would not have happened without the formation of the Net-zero Banking Alliance”.

Speaking in his role as Amalgamated CSO, Frishberg said: “As far as voluntary action goes NZBA has gone incredibly far in terms of driving change.”

However, he added that the jury was out on how much of that change was cosmetic and how much was really driving change in terms of business and emissions.

“It’s hard to argue with the progress being made, but maybe the question is how rewarding is that going to feel when we end up somewhere between 2C and 2.5C of warming?”

The revisions to the guidance, which will be put to member consultation, are still ongoing. Tweaks and adjustments will be made, drawing on the several years of experience that banks now have. The coverage of what is included in targets is also up for discussion.

The NZBA has come under attack by Republicans in the US and has seen significant internal debate about the strength of target setting. In 2022, the Financial Times reported that a number of large US banks were considering quitting over legal risks associated with increasingly stringent decarbonisation commitments.

However, Frishberg said the NZBA had “gotten through the worst” of attacks by entrenched interests.

“We understand what the attack from fossil fuel interests is going to look like… we’ve gotten through that initial confrontation to where banks have settled in and understand that what they are doing is and always has been legally defensible, and also that this is too important and too high-profile a thing to walk away from these initiatives.”

Yet while banks are staying, Frishberg said some are taking advantage of the relative leeway they have been afforded. If institutions are not doing things consistently, he added, that can undermine the rigour of the voluntary standards they have agreed to.

Reuters reported last week that four NZBA member banks had quit the Science Based Targets initiative.

Frishberg said it would be “dangerous to our objectives if the NZBA becomes the safe space and low bar”.

On Monday, the NZBA issued guidance on how banks should consider reporting on transition finance and the metrics they might use.

The group also issued a short progress update, noting that two thirds of its members have set 1.5°C-aligned targets, that the proportion of members setting targets for a number of high-emitting sectors had risen since September last year, and that nine in ten members had met their commitment to set their first targets within 18 months of joining.

Frishberg said that members with overdue targets are often emerging market or smaller institutions where the process is more burdensome. “The general dynamic has been to provide assistance and help, putting banks on a path and a timeline,” he said.