Banks make significant strides in net-zero commitments, but challenges persist

The Net-Zero Banking Alliance is a group of leading global banks committed to ensuring that their business models support the shift to a low-carbon economy. When joining NZBA, banks voluntarily commit to independently setting their first targets for reducing emissions associated with their financing activities in carbon-intensive sectors of the economy within 18 months of becoming members. 

They also commit to developing transition plans within 12 months of setting targets that detail how they will achieve them, and to publishing a full set of sectoral targets covering all or a substantial majority of the carbon-intensive sectors where they have material exposure within 36 months. As of end-May 2024:

• 97% of the 122 banks due to have set their first sectoral targets have done so
• Nearly two-thirds of the 91 banks due to publish transition plans have done so, with 25% more expected by year-end
• Around four-fifths of the 50 banks due to publish a full set of targets have done so

Decarbonisation targets in emerging markets remains a challenge

The 2024 NZBA Progress Report also points to areas in need of additional attention and support. Setting decarbonisation targets for banks remains a challenging exercise due to the quality of client greenhouse gas emissions data, unclear decarbonisation pathways, and a lack of a supportive policy environment. Of the one-fifth of banks that have not met the milestone to set targets covering all or a substantial majority of carbon-intensive sectors, almost all were from emerging markets, where these challenges are particularly acute.

Since 2021, Nordea has set eight sector targets with science-based transition pathways and fulfils the NZBA criteria. Nordea’s sector targets cover a majority of our financed emissions and about two thirds of our lending exposure. 

Nordea's climate transition maturity ladder featured as a case study

Nordea and ING are specifically mentioned in the report for having developed tools to help assess clients’ transition plans to better manage portfolio risk and business strategy and deliver value to our customers. Nordea’s approach is also described as a case study on page 37 in the report, and is also available here.

The report also highlights the expectations from banks that governments will fulfil their own commitments to ensure that the worst impacts of the climate crisis are avoided. Policymakers, business, and banks must work together to accelerate progress towards net zero. This is why the report contains a call-to-action for policymakers to build policy and regulatory environments to support the decarbonisation of the economy.
 

This article is written in collaboration with NBZA.