banking-commitments
The Persistence of Flows
In November 2021, during the COP26 in Glasgow, Mark Carney, then UN Special Envoy for Climate Action and future leader of Canada, launched the Net-Zero Banking Alliance (NZBA) under the auspices of the Glasgow Financial Alliance for Net Zero (GFANZ). This event marked a rhetorical turning point in the global financial sector: leading banking institutions publicly committed to aligning their lending and investment portfolios with net-zero emissions by 2050, in line with the goal of limiting global warming to 1.5°C established by the Paris Agreement. The commitment was presented as a structural transformation of capital towards a sustainable economy.
However, data released in October 2026 from a joint report by ShareAction, Urgewald, and Reclaim Finance reveal a significant discrepancy between this promise and operational reality. Between 2022 and 2025, five founding banks of the alliance—Bank of America, Barclays, Citibank, Deutsche Bank, and Santander—did not reduce the amount of money lent nor the value of their underwriting activities dedicated to coal-related businesses. This continuity in financial support does not represent a simple delay, but a strategic choice to maintain the status quo in a capital-intensive sector.
The tension between formal commitment and real action is documented by multiple sources. As reported by Climate Home News, “data released this week shows those banks and some others did not reduce the amount of money they lent, nor the value of their underwriting, to coal activities between 2022 and 2025.” This statement highlights how the global financial structure is still tied to capital flows towards fossil fuels, despite international regulatory frameworks and alliances.
The underlying mechanism implies that the cost of transitioning to alternative energy sources has not been internalized in banks’ risk models. The persistence of credit for coal suggests a rigidity in existing portfolios, where short-term profitability outweighs long-term decarbonization. This behavior creates a structural friction between global climate goals and daily financial practices.
The Weight of Structural Inertia
The NZBA commitment was conceived as a driver of systemic change, but its effectiveness has been questioned by the lack of binding enforcement mechanisms for members. Banks joined the alliance to improve their reputation and attract investors sensitive to ESG (Environmental, Social, and Governance) criteria, without necessarily modifying their core operations. This discrepancy between communication and operational action is a well-documented phenomenon in the financial sector.
According to an analysis by Climate Home News, “Several major banks that helped set up the UN’s now-defunct Net-Zero Banking Alliance (NZBA) in 2021 have since continued to lend money to coal companies.” The definition of ‘defunct’ for the alliance highlights the fragility of voluntary frameworks compared to market constraints. Without direct economic sanctions or stringent regulatory requirements, banks have maintained their levels of exposure to coal.
The structural rigidity is further amplified by global energy demand. In a context of geopolitical instability and incomplete energy transition, coal remains a reliable and low-cost source of energy in many regions. Banks, operating in a competitive market environment, must balance sustainability with profitability. The decision to maintain loans to coal reflects a rational assessment of immediate financial risks versus long-term climate benefits.
This behavior is not isolated. Other financial institutions have also shown similar resistance to aggressive decarbonization. The banking sector, being a key intermediary in the global flow of capital, has the power to accelerate or slow down the energy transition. The choice to maintain flows towards coal indicates a lack of alignment between declared climate goals and capital allocation strategies.
Investor Pressure
The discrepancy between NZBA commitments and banking practices has attracted the attention of institutional investors, who are beginning to exert pressure for a more rigorous alignment. In July 2021, investors managing $4.2 trillion in assets had already called on banks to strengthen their climate policies or risk rebellions at annual general meetings (AGMs). This pressure reflects a growing awareness among shareholders of the need for concrete actions towards decarbonization.
According to a Reuters article, “Investors managing $4.2 trillion on Wednesday called on some of the world’s biggest banks to toughen their climate and biodiversity policies or risk rebellions at their next annual meetings.” Investors, including Aviva Investors and M&G Investments, have requested short-term goals aligned with the net-zero scenario of the International Energy Agency (IEA). This request highlights the need for measurable and binding metrics to assess progress towards sustainability.
Investor pressure is a crucial factor in driving behavioral change in banks. However, the impact of this pressure is limited by the lack of uniform standards and the difficulty of measuring actual portfolio alignment. Banks may respond to investor requests with public statements or long-term goals, without necessarily changing their day-to-day operations.
This dynamic creates a cycle where sustainability rhetoric prevails over concrete action. Investors, while aware of the problem, face challenges in assessing the real impact of banking policies. The lack of transparency and standardized metrics hinders investors’ ability to exert effective pressure.
Towards a New Equilibrium
The analysis of financial data and banking practices reveals a structural tension between global climate goals and the economic realities of the financial sector. The continued provision of credit for coal by NZBA banks is not an isolated incident, but rather the result of economic and operational constraints that limit the ability to transition rapidly.
The underlying mechanism implies that decarbonization requires not only rhetorical commitments, but also structural changes to banking business models. This includes internalizing climate costs into credit pricing, developing innovative financial instruments to support the energy transition, and increasing transparency in reporting on financed emissions.
The friction between NZBA and actual practices highlights the complexity of the energy transition. Banks operate in an environment where short-term economic constraints often outweigh long-term climate goals. Without stricter enforcement mechanisms and adequate financial incentives, this discrepancy is likely to persist.
The real trade-off concerns the ability of the financial system to align its interests with global sustainability goals. The choice of banks to continue flows towards coal reflects a rational assessment of market risks and opportunities. However, this behavior could lead to increasing financial and reputational costs in the long term, as regulatory and investor pressure intensifies.
Photo by Claudio Testa on Unsplash
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