The failure of the Net Zero Banking Alliance (NZBA) is being hailed by critics as definitive proof that government regulation is “essential” for climate action in the financial sector. The shutdown of the voluntary banking group has become a powerful new argument for those who believe the industry cannot and will not reform itself.
This argument is articulated by Lucie Pinson of Reclaim Finance, who, upon the NZBA’s collapse, stated that the massive reallocation of finance needed to solve the climate crisis “cannot happen without intervention from policymakers and regulators.” Their action, she insists, is “essential.”
The NZBA’s failure provides compelling evidence for this view. The alliance proved powerless to stop its members from leaving when faced with political pressure following Donald Trump’s re-election. The six largest US banks, followed by international players like HSBC and Barclays, were able to simply walk away from their commitments without consequence.
This fragility is the core of the case against voluntary efforts. Critics argue that such alliances are designed to be weak, providing good public relations without requiring any difficult or costly changes. When real-world pressure is applied, they break, as the NZBA did.
With the alliance now defunct, the spotlight turns to governments. The argument that the industry is “handling it” is no longer credible. Campaigners are now using the NZBA’s demise to redouble their efforts, lobbying governments to implement the kind of essential, legally binding regulations—particularly an end to financing for fossil fuel expansion—that the voluntary alliance could never achieve.