The Net Zero Banking Alliance (NZBA) has scrapped a requirement for members to align their lending portfolios with a target of keeping global warming to 1.5°C, instead deciding to allow a wider range of pathways to achieving net-zero in line with global climate goals.

The change was one of several approved by NZBA’s more than 120 members in a vote following a year-long strategic review to inform the group’s future direction. Several US banks have exited the NZBA in light of anti-sustainability political pressure there.

Commenting on the outcome of the strategic review, NZBA today said that acknowledging a wider range of net-zero pathways that align with the Paris Agreement goals “increases flexibility for banks with exposures to a range of markets and sectors to manage targets and transition across their balance sheet, while still including the net-zero by 2050 low/or no overshoot 1.5°C pathways that many member banks already use, and which remain the guiding star”.

The new mandate for the NZBA is focussed on strengthening the support provided to members to achieve their individual climate-related strategies.

According to the Alliance, this will include “a renewed focus on sectoral engagement to support member banks to deepen client relationships and address constraints on green growth by working with their clients to advance policies that stimulate markets and unlock opportunities for investment”.

The Alliance also said the changes “underscore members’ ultimate accountability to shareholders, investors, supervisors, regulators and society”.

Shargiil Bashir, NZBA chair and chief sustainability officer and executive vice president at First Abu Dhabi Bank, said: “We are halfway through the critical decade for action on climate, and we need all sectors, including banking and finance, to commit to moving the needle on emissions reductions.

“As the largest global initiative specifically focused on supporting climate mitigation action by banks, NZBA is uniquely positioned to provide practical support to banks navigating the net-zero transition. I welcome the decision by members to progress NZBA into its new chapter.”

The news about the banking group’s new approach comes as the Net Zero Asset Managers initiative (NZAM) is engaged in its own strategic review in light of the sustainability pushback in the US.

NZAM has suspended member targets and obligations during this time and some members have already opined the asset management group will also have to “carefully consider different decarbonisation scenarios” as part of granting members flexibility in how they contribute to driving climate change mitigation.

Reacting to NZBA’s announcement about its new approach, Jeanne Martin, co-director of corporate engagement at ShareAction, a UK-based NGO, called on responsible investors to “double down on pressure to hold banks accountable to their climate commitments and urge them to play their part in fast tracking the transition rather than delaying progress”.

“Every 0.1 of a degree matters and the higher global temperatures get, the harder it will be to deal with these impacts, and the greater the financial risks for banks and their investors,” she said.