The recent exit of Canadian and U.S. banks from the Net-Zero Banking Alliance (NZBA) initiative highlights growing tensions between climate commitments and political pressures. With banks like TD, BMO, and Scotiabank prioritizing independent strategies, the financial sector faces mounting challenges in balancing sustainability goals with fossil fuel financing.
The NZBA initiative was established in 2021 to align global financial institutions with the Paris Agreement’s goals. With over 100 members representing nearly 40% of global banking assets, the alliance focused on reducing financed emissions, encouraging green investments, and increasing transparency.
These measures were designed to mobilize the financial sector’s efforts toward a low-carbon economy. Sustainable financing is critical in this journey by enabling investments in renewable energy, carbon capture technologies, and reforestation projects.
However, the recent departure of major banks from the NZBA threatens to undermine collective action, raising questions about the alliance’s future and the overall momentum toward net zero.
Balancing Green Goals and Fossil Fuel Financing: The Sustainability Dilemma
In a significant blow to the NZBA, five major Canadian banks—TD Bank, Bank of Montreal (BMO), National Bank of Canada, Canadian Imperial Bank of Commerce (CIBC), and Scotiabank—announced their exit. This exodus highlights the growing tension between political realities and sustainability commitments.
Despite leaving the alliance, these major banks reiterated their dedication to decarbonization and achieving net zero by 2050. Let’s get to know each of the bank’s climate goals and strategies.
TD Bank
TD Bank said it would continue working independently on its climate strategy, leveraging its expertise to support sustainable investments. The bank has already committed over $100 billion in sustainable finance initiatives and aims to achieve net zero emissions in its operations by 2030.
However, critics argue that TD’s significant funding for oil sands and fossil fuel projects undermines its climate claims. Between 2020 and 2023, TD Bank ranked among the top global financiers of fossil fuel expansion, allocating billions to high-emission projects. This dual approach raises questions about the bank’s sincerity in addressing climate change.
Bank of Montreal
BMO emphasized its ongoing efforts to support clients in transitioning to a low-carbon economy. The bank’s Climate Institute and its $330 billion sustainable finance goal by 2025 underscore its commitment to reducing emissions.
The bank has also been active in funding renewable energy projects, including large-scale wind and solar developments across North America. However, like its peers, BMO faces scrutiny for its continued investments in high-carbon industries, which critics argue contradict its net zero ambitions.
Canadian Imperial Bank of Commerce (CIBC)
CIBC highlighted its progress in climate risk management and financing renewable energy projects. In 2023 alone, the bank allocated $45 billion to sustainability-linked loans and green bonds.
CIBC’s partnerships with green technology firms have further bolstered its image as a climate-conscious institution. Nonetheless, its position as a major lender to oil and gas companies casts doubt on its overall impact on reducing emissions.
National Bank of Canada
NBC stated it remains focused on aligning its financing activities with sustainability goals while meeting evolving regulatory standards. The bank has supported projects that advance clean energy and sustainable infrastructure. It has also invested in carbon offset programs to mitigate the environmental impact of its loan portfolio and reach the net zero goal, with the following interim targets.
Scotiabank
Scotiabank reaffirmed its dedication to financing decarbonization efforts, particularly in the oil and gas sector. It recently launched the Scotia Climate Change Transition Fund to provide capital for businesses adopting greener practices.
The fund focuses on sectors like renewable energy, green manufacturing, and sustainable agriculture. Remarking on its exit, Scotiabank spokesperson Katie Raskina stated in an email:
“…[We] will continue to finance the transition and support our clients in implementing their sustainability strategies — this is the most important role that we can play.”
Despite these efforts, Canadian banks remain some of the largest financiers of fossil fuels. Data from 2024 shows TD Bank, RBC, BMO, and CIBC among the top 10 global financiers of oil, gas, and coal projects, which poses challenges to their sustainability narratives.
Royal Bank of Canada (RBC) is now the only major Canadian bank still in the alliance, although its leadership has hinted at reconsidering membership. CEO Dave McKay recently stated that exiting NZBA would not diminish the bank’s climate commitments.
RBC has allocated over $500 billion toward sustainable finance and pledged to achieve net zero emissions by 2050. However, RBC’s role as a top lender to the fossil fuel industry has drawn widespread criticism, making it a focal point for climate activists.
The U.S. Banks’ Departure and a Growing Trend
The NZAM also saw a wave of exits from U.S. banking giants in late 2023 and early 2024. Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, and Wells Fargo are among the notable names that departed the alliance.
These exits coincide with Donald Trump’s return to the presidency and intensified political opposition to climate finance. Republican-led states, such as Texas, have filed lawsuits against banks and asset managers, accusing them of prioritizing climate goals over economic interests.
While these banks have distanced themselves from the NZBA, they continue to pursue independent sustainability strategies. For example, Morgan Stanley and Citigroup have committed to achieving net zero emissions by 2050, with interim targets for 2030.
However, their withdrawal underscores a broader challenge: balancing climate ambitions with political and financial pressures.
What Does This Mean for Global Climate Financing?
The departures from NZBA highlight a troubling trend that may hinder global progress toward net zero. These exits risk fragmenting efforts within the financial sector, which could delay the mobilization of the trillions of dollars required to combat climate change.
As shown in the chart, the world needs $7.4 trillion annually through 2030 under the 1.5°C net-zero scenario. The banking sector has a critical role in ensuring that this amount reaches the right climate projects and initiatives.
Unified alliances like NZBA provide a framework for accountability, collaboration, and standardization, which are essential for large-scale impact. However, political resistance, legal challenges, and the perception of overregulation have created significant barriers.
The exits also send mixed signals to stakeholders, including investors and policymakers, about the financial sector’s commitment to sustainability. Yet, the growing demand for green bonds, renewable energy financing, and decarbonization technologies presents opportunities for banks to demonstrate leadership.
By prioritizing transparency, innovation, and partnerships, financial institutions can continue to play a pivotal role in driving the global transition to a sustainable future.
The post First the Americans, Now the Canadians: What Banks Are Making an Exodus from NZBA? appeared first on Carbon Credits.
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
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