Bank withdraws from partnership with New Zealand Bankers' Association as shared objective of limiting warming to 1.5 degrees Celsius is abandoned
The Net-Zero Banking Alliance (NZBA) has recently revised its framework, broadening the acceptable pathways for net-zero emissions beyond the strict 1.5°C target set by the Paris Agreement. This move has sparked controversy, particularly among banks with strong climate commitments, such as Triodos Bank.
Triodos Bank, renowned for its firm commitment to the 1.5°C target and high standards in sustainable finance, has expressed disappointment and concern with the NZBA’s new more flexible approach. The revised framework, which allows banks to choose from pathways consistent with wider temperature goals under the Paris Agreement, has been criticised by Triodos as a dilution of the necessary strict climate ambition to meet urgent global climate goals.
As a result, Triodos Bank has signalled its intention to exit or reduce its involvement with the NZBA. This decision could have significant implications for the bank's relationships and collaborations within the alliance. Triodos Bank has not specified whether it will leave the NZBA immediately or at a later date.
The revised NZBA framework offers members more flexibility in choosing net-zero pathways that align with the temperature goals of the Paris Agreement. However, this added flexibility has raised concerns among banks like Triodos, who advocate for maintaining ambitious and science-based climate targets. This could lead to realignments of alliances and partnerships within the sustainable banking community, with banks emphasising the importance of strict alignment with the 1.5°C pathway.
In response to the criticism, the NZBA has claimed that this added flexibility will help banks manage targets and transitions across their balance sheets. The revised framework allows for net-zero pathways that involve low or no overshoot of the 1.5°C target.
Despite its decision to leave the NZBA, Triodos Bank has not wavered in its commitment to combatting climate change. In fact, the bank has announced plans to raise its emissions reduction ambition, targeting a cut in its financed emissions from 32% to 42% by 2030. This increased ambition reflects Triodos's determination to play a significant role in the fight against climate change.
Triodos Bank has also stated that it will seek alternative meaningful alliances at European and global levels to continue its focus on climate action. The bank intends to continue working with other banks on climate action, focusing on alternative alliances at European and global levels, such as the Global Alliance for Banking on Values, the European Banking Federation, and UK Finance.
This news highlights the ongoing tensions in the climate finance sector between stricter climate ambition and flexible implementation paths. The decision by Triodos Bank to leave the NZBA and focus on alternative alliances could set a precedent for other banks with strong climate commitments, potentially leading to a shift in the climate ambition and commitment among NZBA members.
No direct regulatory or legislative impacts from New Zealand’s government or local banking regulators on this NZBA framework change were found, nor specific New Zealand bank reactions beyond this general stance of Triodos. However, the fallout from this decision is likely to reverberate throughout the sustainable banking community, influencing future collaborations and banking alliances.
The revised NZBA framework, while offering more flexibility in choosing net-zero pathways, has raised concerns among banks like Triodos that advocate for maintaining strict and science-based climate targets. Triodos Bank, renowned for its environmental-science approach and strong climate commitments, has signaled its intention to seek alternative alliances, particularly within the Global Alliance for Banking on Values, the European Banking Federation, and UK Finance, to continue its focus on climate action and business policies aimed at combatting climate-change.
