Canadian Banks Follow U.S. Peers Out of Net Zero Banking Alliance
Most of Canada’s major banks have elected to exit the Net-Zero Banking Alliance (NZBA), continuing a largely North America-focused exodus from the UN-backed coalition of banks dedicated to advancing global net zero goals through their financing activities, kicked off last month by their Wall Street peers.
Over the past few days, 5 of Canada’s 6 largest banks, including BMO, TD, CIBC, Scotiabank and National Bank have left the climate group. While RBC remains the last large Canadian bank in the alliance, the bank’s CEO Dave McKay recently reportedly said that pulling out of the group would not indicate a lack of commitment to net zero.
Each of the Canadian banks joined the NZBA in October 2021, shortly after the launch of the alliance earlier that year. Members of the NZBA commit to transitioning operational and attributable greenhouse gas (GHG) emissions from their financing activities to align with net zero pathways by 2050, and to set 2030 financed emissions targets, initially focused on key emissions intensive sectors.
After rapidly expanding from 43 banks at launch to over 140 banks representing $74 trillion in 2024, members of the group have come under significant pressure, particularly from Republican politicians in the U.S., who have been warning financial institutions including banks, insurers, asset owners and investors of potential legal violations from their participation in climate-focused alliances and of plans to exclude the companies from state business, as part of a broader anti-ESG political campaign. Notably, each of the Canadian banks have a substantial presence in the U.S. market.
The departure of the Canadian banks follows the exit of every large U.S.-based bank from the NZBA over the past few weeks, including Citi, BofA, Morgan Stanley, Goldman Sachs, JPMorgan, and Wells Fargo
While confirming the decision to leave the NZBA, the Canadian banks also said that their climate goals and sustainable financing programs remain in place. In statements provided to ESG Today, several of the banks also suggested that their climate strategies have advanced over the past few years to the point that they are able to carry on outside of the group.
In a statement provided to ESG Today, for example, s CIBC spokesperson said:
“The NZBA was formed at a time when the global industry was scaling up efforts to take action on climate, and served a valuable role in galvanizing these efforts and establishing momentum. As this space has evolved and matured, and having made significant progress alongside our clients in these areas, we are now well-positioned to further this work outside of the formal structure of the NZBA.”
Similarly, a BMO spokesperson said that “we have robust internal capabilities to implement relevant international standards, supporting our climate strategy and meeting regulatory requirements,” and a TD spokesperson said, “we have the resources, relationships and capabilities to continue to advance our strategy, deliver for our shareholders, and advise our clients as they adapt their businesses and seize new opportunities.”
The NZBA formed part of the Glasgow Financial Alliance for Net Zero (GFANZ), chaired by Mark Carney, Michael Bloomberg, a UN-backed umbrella group of net zero-focused financial sector coalitions, including the Net Zero Asset Managers initiative (NZAM), Net Zero Asset Owner Alliance (NZAOA), Net Zero Financial Service Providers Alliance (NZFSPA), the Net Zero Investment Consultants Initiative (NZICI), the Paris Aligned Asset Owners (PAAO), the Venture Climate Alliance (VCA), and the Net-Zero Export Credit Agencies Alliance (NZECA).
GFANZ announced a major restructuring and repositioning earlier this month, including a shift in focus towards enabling the mass mobilization of capital to support the low carbon transition, and opening participation widely even to firms not participating in the net zero coalitions.