The fight to garner sufficient investment to combat climate change is at a critical juncture. International coalitions and alliances designed to galvanize financial institutions, corporations, and governments toward net zero and climate resilient goals are facing a new wave of fast-evolving challenges. Groups like the Net Zero Asset Managers Initiative (NZAM) and the Net Zero Banking Alliance (NZBA) are under scrutiny, with major players withdrawing amid political headwinds and the threat of legal action, particularly—but not only—in the United States. 

While these setbacks highlight the sensitivity of financial institutions to political shifts and lobby group activities, they also underline the profile and urgency of these coalitions’ work. Beyond their symbolic significance, such alliances have played a pivotal role in driving meaningful action in the financial sector. This article explores the current state of financial institution climate coalitions, the implications of member withdrawals, and why data-driven platforms like the Net Zero Finance Tracker (NZFT) are essential.

The State of Climate Coalitions: A Sector Under Pressure

The withdrawal of major players from climate coalitions marks a significant turning point. Several high-profile institutions have distanced themselves from alliances like NZAM and NZBA due to a combination of political backlash, regulatory challenges, and legal risks. 

For example, NZAM has paused its commitments review process and removed its signatories page amid a wave of criticism, litigation, and allegations from members of the U.S. Congress of NZAM’s “collusion to impose radical ESG goals” and potential violation of antitrust laws. Similarly, six major U.S. banks exited NZBA in a span of weeks. Analysts attribute these withdrawals to growing anti-ESG sentiment among U.S. politicians who are keen to frame climate risk as a political issue. 

Such developments are not isolated incidents. Lawsuits like the one filed by Texas against prominent investors for allegedly driving up energy prices through pro-climate policies highlight the increasingly hostile environment in the US toward addressing the climate crisis. Financial institutions in other countries are also facing pressure over net zero pledges. As political pressure and regulatory scrutiny intensifies, many institutions are reevaluating their participation in coalitions to avoid reputational and legal risks. 

Umbrella movements such as the Glasgow Financial Alliance for Net Zero (GFANZ), created during COP26, have also significantly revised their participation terms, loosening requirements for net zero commitments. However, others such as the Institutional Investors Group on Climate Change remain committed to progressing climate goals. 

Why Climate Coalitions Matter 

Despite these challenges, the role of coalitions in fostering climate action cannot be overstated.  

Strength in Market Signalling 

Remaining coalition members have a crucial opportunity to signal their unwavering commitment to net zero goals to markets, stakeholders, and governments. Even with the recent withdrawals, NZBA banks can remain influential. 

Climate Policy Initiative (CPI) research shows a significant correlation between coalition membership and meaningful progress toward net zero goals. For instance, European pension funds that were part of a net zero coalition were six times more likely to adopt climate targets and five times more likely to implement actionable decarbonization measures than their non-member counterparts.   

In maintaining their focus, these financial institutions help demonstrate their belief in the necessary response of financial initiations and inspire each other as well as smaller organisations to take further action and maintain pressure on regulatory and political authorities. 

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“Climate risks remain material, continue to mount, and pose significant financial threats to institutions and jeopardize the savings and investments of millions of ordinary people.”

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Financial institutions outside of the US have a massive role to play  

While US financial institutions face a challenging political environment, multinationals will still need to adhere to stringent climate disclosure regulations in jurisdictions like the European Union—albeit amid criticism of those mandates— and individual US states such as California may persevere with higher sustainability standards than at the national level.  

Climate risks remain material, continue to mount, and pose significant financial threats to institutions and jeopardize the savings and investments of millions of ordinary people. In this context, financial actors outside the US, like European pension funds, can play a pivotal role in holding asset managers accountable for building sustainable practices across their portfolios and reducing new investment flows in fossil fuel-based assets, thereby reducing negative impacts on the real economy.  

Mobilizing Capital for Emerging Markets 

Some coalitions are now refocusing on addressing barriers to mobilizing capital in emerging markets for a low-carbon transition. The Glasgow Financial Alliance for Net Zero (GFANZ), for example, has outlined priorities such as scaling nature-based carbon markets and enhancing public-private finance partnerships, including Just Energy Transition Partnerships. Enhanced attention on flows to emerging markets is timely given the scale of capital needs and opportunities in these regions. 

The role of Independent Data in ensuring Progress and Impact 

As climate coalitions pivot in response to external criticism, robust data and transparency become critical to maintaining relevance.  The scientific certainty of climate change continues to strengthen with clear and present physical and transition risks for financial institutions and their shareholders. 

Data coverage is improving, but coordinated efforts among data providers are vital to close information gaps and enhance the transparency and comparability of information. Progress is being made through third-party open data initiatives, the standardization of disclosures, and the gradual shift from voluntary to mandatory reporting of emissions and transition plans. 

There have been notable improvements in tracking the adoption of mitigation and divestment targets, policy engagement, and the disclosure of climate risks and investment data. While coverage of portfolio emissions has also improved, it remains incomplete, and comparability between sources is a significant challenge. 

Efforts to make data more accessible, standardized, and machine-readable can improve climate finance transparency. The Net Zero Data Public Utility (NZDPU) is helping to streamline financial entities’ reporting and to enhance accessibility and comparability. Similarly, surveys by organizations like CDP and the Principles for Responsible Investment, along with progress reports from coalitions, provide insightful data to track financial institutions’ targets and implementation efforts. 

Third-party data initiatives such as InfluenceMap, ShareAction, and asset-level databases like BNEF and Asset Impact are also critical. These organizations independently track evidence of climate action, policy engagement, shareholder responses, and impacts. This data can help fill reporting gaps in areas where incentives for financial institutions to disclose may be misaligned, such as fossil fuel investments. 

However, challenges remain. Restrictions on the use of commercial datasets for entity-level assessments reduce transparency and comparability. There is a pressing need to scale up open data initiatives. 

How can CPI help?  

Building on the above data sources, and others, CPI’s Net Zero Finance Tracker (NZFT) is a critical platform for ensuring progress in the financial sector’s response to addressing climate-related risks. As the only tool offering a standardized assessment of nearly 1,000 top financial institutions, the NZFT aggregates data from multiple third-party sources, delivering an accessible and independent view of progress toward net zero goals. This data provides timely and granular insight into the complex challenges faced by private financial institutions as they navigate changing political contexts and the realities of transition and real economy impact. 

The NZFT leverages CPI’s rigorous climate finance methodologies to enhance the credibility and comparability of its insights. This transparency is particularly crucial as reporting gaps and withdrawals by coalition members threaten to obscure progress. By providing clear, actionable data, the NZFT enables stakeholders—including civil society, media, regulators, and investors—to identify leaders, laggards, and areas for improvement in climate finance practices. 

Beyond Climate Finance Tracking, CPI’s broader work—including its Global Innovation Lab for Climate Finance—helps to identify financing gaps and scale solutions to systemic barriers. From fostering financial innovation to engaging with large investors, these efforts are crucial for aligning global capital flows with net zero objectives. 

Even amid shifting regulations and policy landscapes, the real-world impact of emissions and climate risks remain. Coalitions will have a continued role in providing guidance on the transition, and the data provided by the NZFT can help inform that journey.