HSBC Quits Net Zero Banking Group

Climate Finance in Crisis: HSBC Leads European Retreat From Climate Coalition

In a development that campaigners are calling concerning, HSBC has departed from the international banking coalition for net zero objectives. The move makes it the first financial institution from the United Kingdom to exit the group, sparking criticism from activists about the bank's seriousness in confronting the climate emergency. The decision creates a risk that other banks in the UK could also leave the Net Zero Banking Alliance (NZBA), which would deliver another damaging hit to worldwide climate coordination work. HSBC's announcement came after a number of major US financial institutions withdrew before Donald Trump's inauguration in January. His administration's return to power has prompted a backlash against climate initiatives, as he advocates for expanded oil and gas production.

HSBC's Groundbreaking Departure

The London-headquartered bank announced its withdrawal from the Net Zero Banking Alliance (NZBA), a body convened by the United Nations. This makes HSBC the first lender from the UK to formally exit the coalition, a significant moment for European finance. The institution was not merely a passive member; it was an original creator of the alliance at its 2021 inception. At the time, its leadership promoted the NZBA as a vital framework for ensuring accountability and transparency in the sector. Noel Quinn, the bank's chief executive at the time, had championed the initiative. He spoke of its importance in creating a benchmark for the whole banking sector. The departure marks a stark reversal from that initial enthusiasm. It positions HSBC outside the primary formal structure for aligning banking with global climate ambitions.

The Official Justification

In its official statement, HSBC suggested the alliance had fulfilled its initial purpose. The bank stated that the NZBA played a key role in creating the foundational frameworks that help financial institutions set their preliminary targets. With this groundwork now established, the bank argued it could continue its climate strategy independently. The bank claimed it would now concentrate on refreshing and executing its own distinct transition plan to achieve net zero. The institution affirmed its steadfast dedication to helping its customers fund their own transition goals and to continue making strides toward its own 2050 net zero target. It added that supporting its customers' transition efforts brings benefits to their businesses and contributes to a more resilient global economy. The institution indicated it would continue to engage with the NZBA's parent organisation, the Glasgow Financial Alliance for Net Zero (GFANZ).

A Pattern of Retreat

This departure from the climate group is not an isolated event for HSBC. It forms part of a broader pattern of backtracking on its environmental promises. Earlier this year, the bank revealed it was postponing key aspects of its climate objectives by two decades. A target for achieving net zero in its own operations and supply chain was pushed from 2030 to 2050. Furthermore, the institution weakened environmental standards in a new long-range bonus package for Georges Elhedery, its current chief executive. This move was compounded by an internal reshuffle in late 2024 which saw the role of chief sustainability officer removed from the bank's executive operating committee, diminishing its influence on core decisions.

The American Exodus

HSBC’s decision did not occur in a vacuum. It follows a significant exodus of major Wall Street firms that departed the NZBA. In the period following Donald Trump's successful election campaign, every major US bank left the coalition. Departures included the six largest lenders in the United States: Goldman Sachs, JPMorgan Chase, Morgan Stanley, Bank of America, Wells Fargo, and Citigroup. This wave of withdrawals effectively removed the American banking sector from the global group. It was a severe blow to the NZBA, significantly diminishing its international scope and influence. The coordinated departure of such powerful financial players set a precedent, signalling that membership in such alliances was becoming untenable in the shifting American political landscape.

The Specter of Political Pressure

The mass withdrawal of American banks is widely attributed to immense political pressure. The anti-ESG (Environmental, Social, and Governance) movement in the United States has gained significant momentum. Republican politicians, in particular, have aggressively targeted financial institutions for their climate commitments. State attorneys general have threatened legal action against banks in climate alliances, alleging that collaborating on climate goals could violate antitrust laws by stifling competition or boycotting fossil fuel companies. This campaign created a hostile environment, making continued membership a source of significant legal and reputational risk for banks operating in America. The election of Donald Trump amplified this pressure, with his administration signalling strong support for expanding fossil fuel production.

Image Credit - ESG Drive

The Trend Goes Global

The departure from climate alliances is not exclusively an American phenomenon. The trend has spread to other nations, indicating a broader global shift. All of Canada's largest banks have also recently pulled out of the NZBA, following the lead of their US counterparts. Other international players, including Australia's Macquarie Bank and Japan's Sumitomo Mitsui, have similarly exited the coalition. This growing list of international departures underscores the global nature of the challenges facing these climate finance bodies. It suggests that the political and legal pressures first observed in the United States are resonating in other parts of the world, or that banks are preemptively distancing themselves from potential conflicts. The widening exodus threatens to unravel the collective framework established just a few years ago.

Defining the NZBA

The Net-Zero Banking Alliance was launched in April 2021 as a critical component of the Glasgow Financial Alliance for Net Zero (GFANZ). The NZBA, which is bank-led but organized through the finance initiative of the UN environment programme, has a clear purpose. It aims to align the lending and investment portfolios of its members with the goal of reaching net zero greenhouse gas emissions by 2050 at the latest. At its peak, the alliance brought together over 130 banks from around the world, representing a significant portion of global banking assets. Its creation was seen as a major step forward, moving beyond individual institutional pledges to a coordinated, industry-wide commitment to address climate change through the powerful lever of finance.

The Alliance's Ambitious Goals

Membership in the NZBA came with a specific set of demanding commitments. Banks signing up to the alliance agreed to transition all operational and attributable greenhouse gas emissions from their portfolios to align with pathways to net zero before 2050. Crucially, this included setting science-based interim targets for 2030 to ensure credible short-term action. The focus was heavily on financed emissions, also known as Scope 3 emissions, which represent the vast majority of a bank's carbon footprint. Members were required to transparently report on their progress and prioritise action in the most carbon-intensive sectors. These rigorous requirements were designed to ensure that commitments were more than just public relations exercises and would lead to genuine decarbonisation in the real economy.

A Bank-Led Initiative

Although organized under UN auspices, the NZBA is fundamentally a bank-led initiative. Its governance structure is centred on a Steering Group composed of member banks. These banks are elected by the wider membership to provide strategic direction. This structure was intended to ensure that the alliance's requirements were practical and reflected the diverse business models and regional contexts of its global members. The Steering Group's C-suite delegates provide strategic input, shaping the coalition's policies and priorities. This model was designed to give banks ownership of the process, empowering them to lead the charge from within the industry. However, this internal governance also meant that when priorities shifted, the members themselves held the power to change or abandon the alliance.

Image Credit - ESG Drive

Seeds of Discontent

Over time, tensions grew within the alliance. Some member banks began to voice concerns that the NZBA's governance was becoming overly prescriptive. What started as a voluntary coalition with guiding frameworks was perceived by some as evolving into a more rigid body with demanding requirements. The influence of organisations like the Science Based Targets initiative (SBTi) led to more rigorous criteria, which some banks argued increased their legal liabilities. In economies with a heavy dependence on fossil fuels, members expressed that the alliance lacked the necessary flexibility. They argued that its rigid rules did not adequately account for regional energy realities or the complexities of a gradual transition, creating an unworkable one-size-fits-all approach.

A Weakened Stance

In an apparent attempt to stem the tide of departures, the NZBA itself has recently diluted some of its core commitments. In April 2025, members voted to soften the alliance's framework. This included eliminating a mandatory requirement for banks to align their financing activities with the specific goal of limiting global warming to 1.5°C. The changes provided members with more flexibility, a direct response to the criticism that the rules had become too rigid. This move was seen by many as a significant step back from the alliance's initial ambition. While it may have been a pragmatic decision to prevent a complete collapse, it also signalled a retreat from the most robust, science-based climate goals.

Campaigners' Dismay

Climate advocacy groups have reacted to HSBC's departure with swift condemnation. The responsible investment organisation ShareAction described the move with concern, calling it another deeply worrying sign regarding the bank's dedication to solving the climate issue. Campaigners view the withdrawal not as a procedural step, but as a substantive retreat from climate responsibility. Jeanne Martin, a director at ShareAction, expressed deep concern over the decision. Her organisation and others like it have been central to pressuring banks to adopt more meaningful climate policies. They see the exit of an original creator like HSBC as a particularly damaging setback that undermines years of progress in holding the financial sector accountable.

A 'Counterproductive Message'

Critics argue that HSBC's decision sends a harmful message to companies and governments alike. At a time when scientific consensus points to the need for accelerated climate action, the withdrawal of a major financial institution suggests a weakening of resolve. This move could reduce pressure on corporations to decarbonise their own businesses, as they may perceive that a key source of financial incentive is fading. Jeanne Martin of ShareAction expressed that investors will be paying close attention to see how this retreat affects the bank's future policies and public disclosures. The fear is that such exits create a domino effect, eroding the credibility of climate commitments across the entire corporate landscape and slowing the real-economy transition.

Intensified Investor Scrutiny

HSBC’s recent actions have not gone unnoticed by its own investors. The bank is facing mounting pressure from a significant cohort of shareholders who are concerned about its wavering climate strategy. At HSBC's annual general meeting in May 2025, a group of investors who collectively manage over $1.6 trillion in assets publicly pushed the bank to reaffirm its commitment to its net-zero plans. This investor group, coordinated by ShareAction, highlighted the "deeply concerning signals" sent by the bank's recent moves. Mark Tucker, HSBC's departing chairman, confirmed the bank's 2050 net-zero goal at the meeting but admitted that achieving its climate targets was proving more difficult than first anticipated.

Financial Risks of Inaction

Campaigners connect the retreat from climate alliances directly to growing financial risk. They argue that by stepping back, banks are ignoring that the financial dangers of a warming planet are increasing. These risks include the growing frequency and intensity of physical events such as extreme weather, intense heat, and flooding, which have tangible economic consequences for the assets that banks finance. ShareAction’s Jeanne Martin highlighted this connection, suggesting that backtracking on climate commitments is illogical when the costly impacts of global warming are becoming more apparent. From this perspective, abandoning collective climate action is not just an environmental issue but a failure of financial risk management that leaves banks and their shareholders more exposed to future losses.

The Remaining Members

Despite the high-profile exits, many banks remain in the NZBA. In the UK, major financial institutions such as Standard Chartered, Barclays, NatWest, and Lloyds remained on the membership roll following HSBC's departure. These institutions now face a choice: stay within a diminished alliance or follow their American and British peer out the door. Their continued membership will be seen as a key test of the resilience of European banking's commitment to climate action. The pressure on them is likely to increase from both sides. Climate campaigners will urge them to hold the line, while the political and legal arguments that drove other banks to leave will undoubtedly be weighing on their minds.

A 'Coalition of the Willing'?

Not everyone views the departure of major US and other international banks as a fatal blow. Some figures within European banking have framed the exodus as a potential opportunity. Jacco Minnaar, an executive at the Dutch lender Triodos Bank, suggested that the withdrawals could pave the way for a stronger "coalition of the willing." From this viewpoint, a smaller and more agile alliance, composed of deeply committed members, could move forward more decisively without being held back by less enthusiastic participants. This perspective suggests the NZBA could be reforged with a more unified and ambitious agenda, even if its global reach is significantly reduced. It remains to be seen whether this optimistic take will materialise.

Doubts Over 'Independent' Pledges

A common thread in the statements from all the departing banks is the insistence that they remain committed to a 2050 net-zero target. They frame their exit not as an abandonment of their climate goals, but as a shift in strategy toward pursuing these goals independently. However, this narrative is met with considerable skepticism from climate advocates. Critics argue that leaving the primary global framework for accountability and target-setting will inevitably weaken these commitments. Without the peer pressure and transparent reporting mechanisms of the alliance, it becomes much more difficult for external observers to track progress and hold these institutions accountable, raising fears that "independent" action may become "less action."

The Broader GFANZ Context

The crisis within the NZBA is also prompting a recalibration of its parent organisation, the Glasgow Financial Alliance for Net Zero (GFANZ). Originally formed as an umbrella group to unite various net-zero alliances across the financial sector, GFANZ is now repositioning itself in response to the political backlash and series of departures. The group is reportedly distancing itself from the individual alliances it once championed. Instead, it aims to make its guidance available to all financial firms, regardless of whether they are members of a specific net-zero coalition. This change reflects a broader retreat from binding, collective commitments toward a more flexible, opt-in model for climate finance.

A Crossroads for Climate Finance

The departures from the NZBA mark a critical turning point for global climate finance. The exit of HSBC, following its American and Canadian peers, underscores the profound tension between stated climate ambitions and the realities of political pressure and corporate autonomy. The episode raises fundamental questions about the effectiveness of voluntary, industry-led coalitions in driving systemic change, especially in a politically polarised environment. Whether this moment leads to a complete collapse of collective action or a recalibration toward smaller, more dedicated groups remains uncertain. What is clear is that the journey to net-zero finance is proving to be far more complex and contested than its proponents had hoped.