Swiss Giant UBS Exits Global Net Zero Alliance and Rethinks Climate Strategy

UBS, Switzerland’s largest bank, has officially withdrawn from the Net Zero Banking Alliance, becoming the second major institution to exit the group this week after Barclays. The alliance, which was launched in 2021 under the United Nations-backed Glasgow Financial Alliance for Net Zero, was established to help banks align their operations with a pathway to net-zero emissions by mid-century.

But things have changed. Earlier this year, the alliance relaxed its requirements. What was once a clear directive for members to align with the 1.5°C limit and achieve net-zero by 2050 is now a recommendation. The new language encourages members to aim for keeping the global temperature rise well below 2 degrees, while striving for a limit of 1.5 degrees. In short, the teeth have been taken out.

The revised targets were passed by a large majority of the alliance’s 129 members. They shift the focus from binding climate action to aspirational guidelines. What was once a firm commitment has now become a suggestion.

This dilution of ambition has triggered a slow but steady exodus. Over the past year, several of the world’s largest banks have stepped away. JPMorgan Chase, Citigroup, Morgan Stanley, Macquarie, Bank of Montreal, Bank of America, HSBC, Goldman Sachs and Wells Fargo have all exited. And now UBS has followed suit.

An NZBA spokesperson said: “NZBA’s strength lies in the commitment of its member banks to lead the net-zero transition. This long-term work requires courage, consistency and true leadership to stay on track, even when faced with barriers to action.

“As we look ahead, NZBA remains focused on supporting the many committed banks driving this transformation forward. The need for bold action from the banking sector has never been greater, and NZBA is here to help deliver it.”

The bank’s retreat from the alliance is not an isolated move. It reflects a broader recalibration of its environmental, social and governance strategy. Earlier this year, UBS quietly pushed its net-zero target from 2025 to 2035. That delay raised eyebrows, but the bank pointed to the complexities involved in absorbing Credit Suisse following the high-profile merger. The integration brought additional emissions into UBS’s portfolio, complicating its near-term climate goals.

In its public statement, UBS cited the need for more robust carbon accounting methods and greater supply chain transparency. Rather than chasing “aspirational goals without substance,” the bank says it prefers to follow credible, science-based pathways. Its revised roadmap lays out a plan for gradual reductions in financed emissions and a stronger focus on building internal infrastructure for climate-related data.

But the shift goes beyond timelines and technicalities. In its latest sustainability report, UBS removed language that previously tied executive pay to environmental and social performance. For years, bonus structures had included emissions targets across key sectors such as real estate, power generation and cement. That linkage has now been dropped.

UBS is not alone in scaling back its ESG commitments. The financial sector more broadly is responding to increasing political and regulatory headwinds, particularly in the United States.

The re-election of Donald Trump has marked a dramatic turn in the global ESG conversation. His administration has wasted no time targeting climate policy and corporate diversity efforts. A series of executive orders aimed at environmental and social governance frameworks has sent ripples through the global investment community. Legal exposure for companies based in the US has increased, and fund managers worldwide are taking note.

The backlash is beginning to influence sentiment in Europe as well. Investors are growing cautious as they try to navigate changing regulations, including new ESG reporting requirements introduced under the European Commission’s Omnibus package.

That uncertainty has already left its mark. During the first quarter of 2025, sustainable investment funds saw a record $8.6 billion in net outflows. However, the mood shifted again in the following quarter, when inflows rebounded to nearly $5 billion.

The ESG landscape is no longer stable. It is fragmented, politicised and in constant flux. For global banks like UBS, the challenge now is to chart a course that balances reputational risk, regulatory pressure and investor expectations, without getting caught in the crossfire of a growing ideological divide.