Scotiabank Departure Casts Shadow on Bankers' Climate Commitments

 Scotiabank leaves net-zero banking alliance, joins other big U.S. and Canadian banks

Canada's Bank of Nova Scotia, or Scotiabank, is also leaving the Net-Zero Banking Alliance, the bank said Monday. It's the latest in a string of recent decisions made by Canada's big banks: Toronto-Dominion Bank Group, Bank of Montreal, National Bank of Canada, and Canadian Imperial Bank of Commerce all severed ties with NZBA on 17 January, 2025.

It is not an exodus, though: in the last two months, some of the biggest US banks have quit the coalition, such as JPMorgan Chase, Morgan Stanley, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs.

NZBA and Its Climate Commitments
The NZBA was established under the United Nations-backed Glasgow Financial Alliance for Net Zero, which is supposed to align the banking portfolios to net-zero emissions targets by 2050. The alliance comprises nearly 140 global banks that committed themselves to cleaning up their energy investments at the COP26 climate summit in Glasgow in 2021 and announced a commitment of $130 trillion.

Reasons for the Exit
This departure of Scotiabank and other banks from NZBA is indicated by the growing pressure over the feasibility and implications of such commitments. The reasons given by the banks for leaving NZBA are as follows: 
Uncertainty over climate commitments: It has been proved that the portfolios of financial institutions are not tallying with the net-zero goal since the financing of fossil fuels is a continuous process.
Some of the allegations against banks are overstating their environmental commitment and just not doing anything.
Political Risks and Backlash: Increasing US political environment, especially the MAGA movement and also negative sentiment towards ESG initiatives, increases the risk of a political backlash.
Concerns related to anti-competition: Legal risks and fear of antitrust actions have made financial institutions circumspect about their participation in global climate coalitions.
The bank representative, Katie Raskina said, "While the bank left the NZBA, it dedicated itself to a Climate Transition Plan, which continued its efforts at helping clients use sustainability strategies.
International Influences on Climate Activities
The NZBA has withdrawn major banks that have significant concerns over the future of global climate financing, especially among developing countries relying on foreign funding to achieve sustainability projects. US bank withdrawal is considered a setback in the global international climate diplomacy.

This is a bad sign for emerging markets, said Rahul Prithiani, Senior Director at CRISIL Intelligence, in a statement to Outlook Business earlier this year. These institutions will then not be available for access by emerging markets when they need access to critical funding for renewable energy and carbon-reduction projects.

Broader Climate Finance Trends
NZBA exits: The trend behind the questioning of an active role for financial institutions in climate coalitions is evident. A fine example of the same is the withdrawal of Franklin Templeton from Climate Action 100+, which happens to be a shareholder-led effort to put pressure on companies in terms of curbing emissions.
These include subtlety involving sustainability goals with political, legal, and operational constraints.

Road Ahead
It is within such unions that the NZBA has received its criticisms, yet key to solving global climate change problems, although their success will be hugely dependent on matters of transparency and accountability and within national and international frameworks of law.

Government, private, and banking systems must make sure that the promises made in climate finance are not mere lip service in terms of action for the climatic vulnerable regions of the world.