{"id":69045,"date":"2025-10-20T23:07:17","date_gmt":"2025-10-20T23:07:17","guid":{"rendered":"https:\/\/energytracker.asia\/?p=69045"},"modified":"2025-10-20T23:07:24","modified_gmt":"2025-10-20T23:07:24","slug":"ubs-quits-the-net-zero-banking-alliance-the-consequences","status":"publish","type":"post","link":"https:\/\/energytracker.asia\/ubs-quits-the-net-zero-banking-alliance-the-consequences\/","title":{"rendered":"UBS Quits the Net-Zero Banking Alliance: The Consequences"},"content":{"rendered":"
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The Swiss bank UBS has been among the founding members of the Net-Zero Banking Alliance (NZBA), an initiative driven by the world\u2019s leading banking institutions, to advance global decarbonisation goals through their financing activities and achieve net zero by 2050. Over the years, the number of NZBA members increased from 43 banks upon launch to 144 in 2024<\/a>. However, in 2025, the coalition experienced a mass exodus of members, ultimately derailing its future. Many of the biggest names in the industry quit. Yet, through the lenses of Southeast Asia\u2019s energy transition, the exit of the Swiss UBS can prove the most important action due to the bank\u2019s significant portfolio exposure to fossil fuel developers operating across the region.<\/p>\n\n\n\n

Still, with or without the NZBA, it is up to every bank to ensure they are acting in good faith and are channelling their financial support towards investments in line with the Paris Agreement goal \u2014 not projects that continue to exacerbate the climate crisis.\u00a0\u00a0<\/p>\n\n\n\n

UBS Quits the Net-Zero Banking Alliance<\/strong><\/h2>\n\n\n\n

On Aug. 7, UBS announced that it had withdrawn from the UN-backed Net-Zero Banking Alliance, after its \u201cannual assessment of sustainability- and climate-related memberships<\/a>,\u201d noting that although the alliance had provided valuable frameworks for initial target-setting, the institution had advanced its own capabilities. With the move, UBS becomes the first major European bank outside of the UK to exit the coalition.\u00a0<\/p>\n\n\n\n

UBS joined the initiative in 2021 as one of the founding members. In its Climate Report 2021<\/a>, the bank revealed that it was working with other members \u201cto develop necessary methodologies, frameworks and guidelines to reach net-zero emissions latest by 2050\u201d. It also committed to \u201cpublishing ambitious intermediate targets for priority sectors\u201d and to continue \u201cto engage with power generation and extraction companies [among others] on their climate transition plans, and raise our voice with stragglers\u201d.\u00a0<\/p>\n\n\n\n

The withdrawal follows UBS\u2019 decision from earlier this year to push back its net-zero target for operations by 10 years, from 2025 to 2035. The bank is also no longer committed to the previous target of aligning 20%<\/a> of its assets under management with net zero by 2030. UBS attributed the moves to the recent acquisition of another Swiss giant, Credit Suisse.\u00a0<\/p>\n\n\n\n

UBS\u2019 announcement is the latest in a series of big exits that have posed a significant blow to the NZBA. Earlier this year, the UK-based HSBC and Barclays, as well as Canada\u2019s leading banks<\/a>, all withdrew from the alliance. The moves followed the mass exodus of US majors, including JP Morgan, Citi, Bank of America, Morgan Stanley, Goldman Sachs and Wells Fargo, which all left the coalition between the end of 2024 and January 2025. Japanese and Australian banking institutions have also recently quit the NZBA. This series of events even prompted the alliance to initiate a member vote to decide on a proposed transition from a membership-based coalition to establishing its guidance as a new framework initiative. Following the vote, at the beginning of this month, a spokesperson announced that the NZBA would no longer be a member-based alliance and would cease operations immediately<\/a>.<\/p>\n\n\n\n

However, banks leaving climate alliances are not just symbolic events but often a reflection of deeper shifts in how financial institutions perceive collective commitments, regulatory risk, geopolitics and their sustainability strategies. For example, the mass exodus from the NZBA began soon after Trump<\/a> won the US election and launched his organised campaign against climate action, including pulling out of the Paris Agreement, reverting key environmental laws and prioritising coal and gas buildup at the expense of renewables.\u00a0<\/p>\n\n\n\n

\u201cWe are witnessing a major anti-ESG backlash originating in the United States and increasingly influencing Europe,\u201d explained Johanna Fr\u00fchwald, finance campaigner at Urgewald, in an interview for Energy Tracker Asia.<\/p>\n\n\n\n

NZBA Doomed From the Start?<\/strong><\/h3>\n\n\n\n

It wasn\u2019t UBS’ decision that brought the initiative to a halt. In fact, it was starting to show cracks a lot earlier, with experts from BankTrack<\/a> largely questioning its effectiveness and noting that the coalition had never been up to the task. European Central Bank research<\/a> argues that such voluntary private-sector initiatives may have a relatively limited impact on decarbonisation.<\/p>\n\n\n\n

\u201cEven before the Net-Zero Banking Alliance began to fall apart, it had already failed to deliver on its commitments.\u00a0 What we need is climate action, not climate rhetoric. Many of the first members to withdraw were, in any case, never truly there to drive change, but rather to create the illusion of progress,\u201d Fr\u00fchwald notes.<\/p>\n\n\n\n

The coalition has long been criticised<\/a> for lacking any obligation to tackle fossil fuel financing, the main driver of the climate crisis. In total, financial institutions have provided over USD 385 billion<\/a> to the coal industry since 2021, when the NZBA launched. In 2024 alone, the world\u2019s leading banks granted fossil fuel firms USD 869 billion<\/a> in financing.<\/p>\n\n\n\n

Furthermore, in April this year, the NZBA voted to loosen the requirement for members to align their portfolios with the Paris Agreement\u2019s goal of limiting the global temperature rise to a maximum of 1.5\u00b0C by the end of the century. Instead, the new guidance<\/a> introduced vague language on the goals of members, including to limit global warming to \u201cwell below 2\u00baC, striving for 1.5\u00baC\u201d.\u00a0<\/p>\n\n\n\n

\u201cThe NZBA experience clearly shows that voluntary alliances are not sufficient to shift financial flows from fossil fuels to renewables. Ultimately, fossil finance must be effectively regulated \u2014 not only for climate reasons, but also to safeguard the stability of the financial system. Central banks, financial regulators and supervisory authorities must finally take a more active role,\u201d Fr\u00fchwald states.<\/p>\n\n\n\n

UBS Faces Criticism Over Gap Between Sustainability Rhetoric and Contradictory Fossil Fuel Practices<\/strong><\/h2>\n\n\n\n

In a press release<\/a> following the exit from the NZBA, UBS reaffirmed its ambition to be \u201ca leader in sustainability\u201d, promising to continue progressing its strategy to \u201cProtect, Grow and Attract\u201d. Importantly, the bank claims it considers climate change risks and opportunities for the benefit of its clients, investors, and all of its stakeholders.<\/p>\n\n\n\n

Despite this, UBS hasn\u2019t yet committed<\/a> to a coal phaseout and has scrapped the commitment of its acquired Credit Suisse bank to reduce coal exposure to 5% by 2030.<\/p>\n\n\n\n

As per its 2024<\/a> report, by 2030, UBS aims to reduce \u201cabsolute financed emissions associated with UBS in-scope lending from 2021 levels for fossil fuels by 70%.\u201d Among the key achievements for 2024, the bank identifies exceeding its 2030 fossil fuel lending decarbonisation target, with estimated financed emissions having decreased by 80%<\/a> in 2023 compared to the 2021 baseline.\u00a0<\/p>\n\n\n\n

While Reclaim Finance<\/a> considers UBS\u2019 target one of the most ambitious among all NZBA members, the experts note that it remains highly selective and somewhat misleading. The reason is that UBS\u2019 fossil fuel expansion projects aren\u2019t financed through loans, but rather through general corporate finance, such as bond issuances, which aren\u2019t covered<\/a> by the institution\u2019s emissions reduction target.\u00a0<\/p>\n\n\n\n

The bank\u2019s report also states<\/a> that with the remaining concentrated portfolio, it would not expect \u201cthe same level of emission reductions over the next few years,\u201d due to the reliance on fossil fuels \u201cfor energy security and because it is the most affordable source of energy in many countries\u201d.\u00a0<\/p>\n\n\n\n

However, this isn\u2019t the case for many Southeast Asian countries. For example, solar power is already cheaper<\/a> than natural gas in the Philippines, Malaysia and Thailand. Furthermore, fossil fuels’ import dependence, paired with the price volatility on global markets, has left many Asian countries starving for power or made them pay above-market prices for deliveries in recent years, ultimately undermining their energy security<\/a>. The unaffordably<\/a> high LNG prices have also led to the volatile demand<\/a> being far from projected, reducing the appetite for gas in key Asian markets and exacerbating the stranded asset risk facing investors.\u00a0<\/p>\n\n\n\n

Asked about the discrepancies between UBS\u2019 public communication and the reality painted by its financing activities and the findings in BankTrack\u2019s report<\/a>, Fr\u00fchwald, says that the bank has a strong interest in presenting itself positively to the public and creating the impression that it is pursuing a sustainable path and taking ESG concerns seriously.\u00a0\u00a0<\/p>\n\n\n\n

\u201cWhile UBS has indeed made some progress on the banking side, having reduced<\/a> its financing of fossil fuel companies in recent years, it still ranks among the world\u2019s largest banks supporting the fossil fuel industry,\u201d the expert explained.<\/p>\n\n\n\n