Leading banks are scaling back their net-zero commitments and other climate-related policies, and in some cases, withdrawing them altogether, a new report published by the TPI Global Climate Transition Centre at the London School of Economics (LSE) has suggested.
The State of the Banking Transition 2026 report assessed 36 of the world’s largest banks on their efforts to transition to a low-carbon economy, and their sectoral emissions reduction targets. It made this assessment using two elements: the Net Zero Banking Assessment Framework (NZBAF) and Carbon Performance (CP) for Banks.
As it found, most banks remain ‘at an early stage’ in enabling the transition to a low-carbon economy, with some showing signs of ‘stalling’ on their commitments.
‘In the past three years, assessed banks have reduced their low-carbon ambition overall, with some even cancelling their commitments, targets and policies outright,’ the TPI Centre noted.
In addition, since peaking in 2022 and 2024, sectoral target-setting by banks has ‘declined sharply’, with no bank setting new short-term (i.e. to 2030) targets this year, and few covering sectors such as chemicals, food, diversified mining and coal.
Elsewhere, while 30 of the 36 banks assessed classify climate-related risks as a ‘key risk’, just seven disclose the underlying accounting assumptions and judgements used to quantify climate-related risks in their financial statements.
“Our research shows a clear slowing down and, in some cases, retreat from the banking sector in relation to climate action, just when financial risks are becoming harder to ignore,” commented Algirdas Brochard, policy fellow and research project manager at the TPI Centre,
“Most banks now recognise climate risk as a key risk, yet many don’t disclose how they account for it, leaving a gap in what investors and policymakers can assess about banks’ exposure.”
Climate policy
On average, the 36 banks met the criteria for just 21% of NZBAF’s 72 sub-indicators examining climate transition policies and disclosures. No bank met more than one-third of the indicators, while half of the banks assessed weakened their disclosures on at least one indicator over the past year.
Net zero commitments recorded the largest decline, with banks meeting an average of 22% of the relevant sub-indicators in 2026, down from 33% in 2024.
Notable regional differences were evident, with European banks meeting 27% of the sub-indicators, while US banks met 13% and Chinese banks 6%. Every EU bank featured in the assessment disclosed information on financed emissions and financial exposure to high-emission sectors, reflecting mandatory regional disclosure requirements, the TPI Centre added.
However, here too there were discrepancies, with bank scores varying significantly – among European banks, the difference between the highest and lowest scores was approximately 15 percentage points.
‘Climate change not retreating’
“The retreat from net zero commitments is deeply worrying, but climate change is not retreating with them,” added Simon Dietz, research director at the TPI Centre and professor of environmental policy, department of geography and environment, LSE. “Floods, heatwaves and changes in energy markets will still affect the businesses banks lend to and the assets they hold.
“Our research shows that banks are beginning to reflect these risks in their financial statements, but only a handful provide quantitative evidence to support their assessments. Investors need to understand how banks are evaluating climate risks, whether they judge the financial consequences to be large or small.” Read more here.
