The folding of the Net Zero Banking Alliance (NZBA) has made it clear that an “essential” intervention by policymakers is now required to steer the financial sector on climate. The failure of this major voluntary effort has effectively ended the debate on whether the industry can regulate itself, according to critics.
The NZBA was the industry’s best attempt at a voluntary solution. It created a framework, attracted a huge membership, and had the backing of the United Nations. Its comprehensive failure, therefore, is being seen as the definitive test case for self-regulation.
The test that it failed was a political one. The alliance was unable to hold itself together when faced with the “anti-woke” pressure that followed Donald Trump’s re-election. The departure of its most powerful members, from JPMorgan Chase to HSBC, showed that voluntary commitments are easily discarded when they become inconvenient.
This outcome has led activists like Lucie Pinson of Reclaim Finance to declare that regulatory intervention is “essential.” The argument is simple: if the industry’s best voluntary effort can collapse so easily, then the voluntary path is a dead end.
The onus is now firmly on governments. The failure of the NZBA has created a policy and credibility vacuum. Campaigners are now arguing that this vacuum must be filled with the one thing the alliance always lacked: the power of legally binding rules. The intervention, they insist, is no longer just an option, but an absolute necessity.