TriplePundit • As the Net-Zero Banking Alliance Fades Into History, Biodiversity Takes Center Stage

The Net-Zero Banking Alliance launched in 2021 to much fanfare, aiming to rally financial giants behind the global push to reach net-zero greenhouse gas emissions by midcentury. Under the umbrella of the United Nations, the Alliance soon attracted dozens of firms, including U.S.-based giants like Goldman Sachs and JPMorgan Chase, reaching a peak of almost 150 financial institutions. Just a few years later, the Alliance shut down at the start of this month, but the path to net-zero by 2050 hasn’t reached a dead-end as a number of banking giants are looking toward new climate finance plans linked to biodiversity.

The collapse of the Net-Zero Banking Alliance

Members of the Net-Zero Banking Alliance voluntarily committed to follow science-based targets for achieving net-zero portfolios by 2050 and to publicly report on their carbon footprints.

But the effort to achieve voluntary global consensus was premature. Conservative critics, particularly in the U.S., lambasted the Alliance as anti-competitive collusion. Though the Alliance and similar organizations focused on net-zero said they didn’t compel their members to ban fossil fuel underwriting or enact any particular policies, the suggestion of antitrust violations presented real reputational and legal risks for companies.

For example, 10 conservative U.S. attorneys general filed suit against the asset managers BlackRock and State Street in November of last year, saying they illegally colluded to manipulate the market away from coal and citing their membership in net-zero financial coalitions as evidence of antitrust violations. Both asset managers canceled their coalition memberships shortly after.

The lawsuit and the results of the 2024 presidential election soon pushed more U.S. firms to follow suit. Bank of America, Citigroup, Wells Fargo and Morgan Stanley were among the first U.S. companies to exit the Net-Zero Banking Alliance at the end of last year, along with Goldman Sachs and JPMorgan. The trend soon went global, with banks including HSBC, UBS and Barclays dropping out over the summer. This month, the Alliance ceased operating as a member organization, though it continues to provide banks with access to its library of guidance documents.

“The unraveling of participation … reflects broader challenges in climate finance,” the global decarbonization consultancy Ausene observed in an analysis this summer. “As banks weigh net-zero commitments against regulatory pressures and market realities, voluntary alliances face a tough road ahead.”

The biodiversity alternative

Though uncertainty around antitrust pushed more companies to exit coalitions like the banking alliance, that doesn’t stop them from pursuing more sustainable investment strategies on their own. In particular, signs of an alternative biodiversity-focused approach to climate finance are emerging.

Goldman Sachs was among the first to leave the Net-Zero Banking Alliance last year, but the company was already working on a new paradigm. In March, the company’s asset management brand launched a five-year, $500 million biodiversity bond fund, with 20 percent set aside for reforestation and other direct initiatives. The remaining 80 percent is reserved for underwriting corporate sustainability commitments with broader biodiversity goals.

JPMorgan Chase is another U.S. banking giant to introduce new sustainability initiatives independently, enabling it to avoid regulatory entanglements and accusations of illegal collusion with other financial firms. Just weeks after Donald Trump’s inauguration, the company released a report that called for elevating climate risk awareness from a sidebar to a matter of sound, daily business practice in the financial sector.

“Success in the new climate era hinges on our ability to integrate climate considerations into daily decision-making,” Sarah Kapnick, former NOAA chief scientist and current head of climate advisory at JPMorgan Chase, wrote in the report. “Those who adapt will lead, while others risk falling behind.”

JPMorgan followed up last week with a new vision for ensuring biodiversity benefits from the carbon credit market.

A new framework for biodiversity investing

Companies are on track to purchase a billion carbon offset credits annually by 2030. These offsets allow companies to make claims like “carbon neutral” by investing in projects that reduce emissions somewhere around the world, such as renewable energy installations or reforestation efforts.

While carbon offset projects have the potential to reduce emissions, their success is highly dependent on how they’re designed and how credits are accounted for. Poorly designed projects and programs can have little to no impact on emissions and can even be damaging to local ecosystems. For example, reforestation projects that prioritize rapid carbon capture to qualify for credits often plant fast-growing but non-native tree species that harm biodiversity.

A new JPMorgan white paper, produced with the U.S.-based carbon management firm Carbon Direct, looks to demonstrate how investors can pursue dual outcomes from the projects that qualify for offset credits — targeting not only reduced emissions, but also biodiversity benefits.

“Investing in nature-based solutions demands both scientific rigor and local relevance,” Sarah Federman, VP of landscape decarbonization at Carbon Direct, said in a press statement announcing the guidance. “Working with JPMorganChase allowed us to deliver a framework that is grounded in data and designed to help market actors design and select projects that credibly advance biodiversity and climate outcomes.”

The paper is based on an analysis of more than 1,600 global offset projects, highlighting where they often fall short and opportunities for improvement. While noting that biodiversity outcomes are “a complex challenge for the market,” the guidance presents a six-point framework for action, starting with an emphasis on achieving project-specific results. “Biodiversity benefits are often local and hard to compare across geographies,” the paper reads. It also outlines best practices for goal-setting, project management, and long-term planning toward a successful integration of biodiversity improvement with greenhouse gas emissions goals.

Still, it remains to be seen if the framework will help accelerate biodiversity and climate investing to any significant degree. In the U.S., the gauntlet of partisan political attacks has only intensified since January. With the federal government checking out of the global effort to prevent catastrophe, direct action on the part of the U.S. financial community is more essential than ever before.

Image: Joshua Earle/Unsplash