Net-Zero Banking Alliance (NZBA) Strengthens Banking Climate Commitments with Updated Guidelines Adoption

On March 13, the Net-Zero Banking Alliance (NZBA) released the second version of its Guidelines for Climate Target Setting, following a comprehensive review led by NZBA member banks since early 2023. While the release received considerable praise, it also encountered notable criticism.

The praise primarily revolves around the revisions broadening the target scope to include banks' capital markets activities in addition to lending and investment activities, the refinement of technical language to reflect advancements in “practices, methodologies and data availability” and the preservation of key principles and ambition of the original guidelines.

Criticism focuses on several key areas:

1. Failure to address “crucial issues”: Critics argue that the guidelines overlook crucial issues, notably the discrepancy between sectoral intermediate targets and net-zero commitments among member banks.

2. Combined target setting and reporting: Concerns have been raised about the decision to allow banks to report both facilitated and financed emissions as a single figure.

3. Transition plan vagueness: Critics argue that only requiring banks to "publish a high-level transition plan, which may be a part of existing disclosures” is vague.

Overall, the updated guidelines represent a significant step (or as some call two steps) forward in strengthening banking climate commitments.