September 29, 2025
The collapse of the Net-Zero Banking Alliance has raised fresh doubts about the financial sector’s role in combating climate change. Established in 2021 under the UN’s umbrella, the alliance brought together more than 140 banks with $74 trillion in assets, pledging to align lending practices with the Paris Agreement. Yet by August 2025, the group suspended its activities after major U.S. and European banks withdrew. While many observers blame political pushback, particularly in the U.S. under Trump’s administration, research suggests that economics—not politics—drove the retreat.
At the heart of the issue lies fossil fuel profitability. Oil and gas projects remain highly lucrative, especially after the Russia-Ukraine war pushed energy prices higher. Companies like BP and Shell, once praised for ambitious climate targets, have scaled back renewables investment in favor of fossil fuels. Banks followed suit, with lending to oil and gas projects hitting a three-year high of $869 billion in 2024. For many lenders, maintaining ties with fossil fuel clients simply made better business sense than meeting stricter climate commitments.
The retreat also reflects growing tension within financial institutions. Stricter net-zero standards demanded banks cut fossil fuel financing entirely and track hard-to-measure “Scope 3” emissions from customers and suppliers. Executives reported mounting pressure from clients who saw these requirements as a burden. What once offered reputational benefits began to feel like a liability, especially as activist groups accused banks of “greenwashing.” In short, climate alliances became more costly and politically risky than profitable.
Still, the risks of climate inaction loom large. Long-term loans to fossil fuel projects could leave investors exposed to trillions in stranded assets if the clean energy transition accelerates. And climate-related disasters—floods, droughts, wildfires—are already hitting profits across industries. While some banks insist they’ll pursue sustainability goals independently, experts warn that every delay makes the eventual shift more disruptive. For now, however, money continues to flow into fossil fuels, even as the planet pays the price.
