The Coal Paradox: How Founding Members of the UN Net-Zero Banking Alliance Continued Financing the World’s Dirtiest Fuel

Executive Overview

In November 2021, amidst the high-stakes diplomacy of the COP26 climate summit in Glasgow, the global financial sector presented itself as a key actor in the fight against climate change. Under the banner of the Glasgow Financial Alliance for Net Zero (GFANZ) and its banking arm, the UN-backed Net-Zero Banking Alliance (NZBA), world financial leaders pledged to align their lending and investment portfolios with net-zero greenhouse gas emissions by 2050. Spearheaded by Mark Carney, former Governor of the Bank of England and Bank of Canada alongside his role as a UN Special Envoy, the coalition represented a commitment to mobilize trillions of dollars in private capital toward sustainable energy systems.

However, a landmark report published by Urgewald, a German environmental and human rights research organization, exposes a stark divergence between public climate commitments and institutional lending practices. According to the investigation, several of the world’s largest banking institutions—including founding architects of the NZBA such as Bank of America, Barclays, Citibank, Deutsche Bank, and Santander—have continued to direct billions of dollars in credit and underwriting services to the coal industry.

Between 2022 and 2025, a period that should have seen accelerated decarbonization following the Glasgow pledges, these institutions failed to deliver meaningful reductions in their overall financial exposure to coal activities. Crucially, Urgewald’s data reveals a split within the coalition: roughly half of all NZBA member banks involved in coal financing actually increased their financial commitments to the sector over this three-year window, while the other half reduced them.

This revelation raises fundamental questions about the efficacy of voluntary, industry-led climate alliances, highlighting how regulatory loopholes, flexible internal policies, and short-term market incentives have enabled global banks to maintain deep financial ties to thermal coal—the single largest contributor to global temperature increases.

Detailed Chronology

[April 2021] ─── NZBA Founded under UN Framework
       │
[Nov 2021]  ─── COP26 Glasgow: GFANZ Launched by Mark Carney
       │
[Feb 2022]  ─── Russia-Ukraine War Triggers Global Energy Shock
       │        └─ Coal demand & prices skyrocket; bank profitability spikes
       │
[2022–2023] ─── Political Backlash & Anti-ESG Pressures
       │        └─ US banks face domestic political pushback on fossil fuel exclusions
       │
[2023–2024] ─── Underwriting Loopholes Exploited
       │        └─ Capital market operations cushion fossil fuel clients
       │
[2025]      ─── Urgewald Exposes Financing Data
                └─ 50% of NZBA coal-financing members show increased exposure

2021: The Promises of Glasgow

The groundwork for the modern private-sector climate movement was established in April 2021 with the creation of the Net-Zero Banking Alliance, which eventually expanded under the GFANZ umbrella at COP26 in November 2021. Promoted as a industry-led framework, the alliance assembled over 100 financial institutions managing tens of trillions in assets. Founding members committed to setting intermediate 2030 targets for high-emitting sectors, with thermal coal phase-outs prioritized as an urgent milestone. Mark Carney championed the initiative as proof that private finance could drive the global clean energy transition.

2022: Geopolitical Shocks and the Energy Crisis

The alliance’s resolve met its first major test in early 2022 following Russia’s invasion of Ukraine. The resulting global energy crisis reshuffled commodities markets, driving coal prices to record highs as nations scrambled to secure emergency power supplies. Despite their formal obligations under the NZBA framework, many signatory banks seized short-term revenue opportunities. Instead of imposing strict phase-out criteria, institutions extended new credit facilities and facilitated bond issuances for coal operators capitalizing on high market demand.

2023–2024: Policy Erosion and Structural Deflection

By mid-2023, the momentum of the Glasgow summit was increasingly countered by institutional resistance and political friction, particularly in North America, where anti-ESG (Environmental, Social, and Governance) legislative pressure led several Wall Street banks to scale back their environmental language. Simultaneously, structural gaps in the original NZBA charter became increasingly evident.

While banks committed to lowering direct lending emissions, many shifted their support to capital market activities—such as underwriting bonds and equity issuances—which fell into regulatory gray areas or were excluded from early net-zero target accounting.

2025: The Urgewald Accounting Reckoning

The publication of Urgewald’s tracking report offers a comprehensive look at bank financing during the post-Glasgow era (2022–2025). Analyzing transactions across direct loans, debt syndication, and underwriting value, the report demonstrates that global bank funding for the coal industry remained resilient despite net-zero pledges. Rather than producing a unified phase-out of fossil fuels, the alliance split into two distinct factions: institutions actively reducing their coal exposure, and those maintaining or expanding their financial footprint in the sector.

Supporting Context & Metrics

To understand the scope of bank involvement, it is essential to examine the specific financial mechanisms through which capital flows to coal companies, alongside the performance metrics of key NZBA founders.

The Mechanics of Coal Financing: Direct Lending vs. Underwriting

Financial support for coal companies generally operates through two primary vehicles:

1. Direct Lending (Corporate Loans & Revolving Credit Facilities): Traditional loans provided directly from a bank’s balance sheet. These carry credit risks for the bank and appear directly on financial statements.
2. Underwriting (Investment Banking Operations): Facilitating the issuance of corporate bonds and equities for coal corporations. Underwriting enables coal companies to raise capital directly from institutional investors without requiring the bank to hold the debt on its balance sheet indefinitely.

Urgewald’s methodology incorporates both direct lending and capital market underwriting drawn from its Global Coal Exit List (GCEL)—a database tracking companies operating along the thermal coal value chain, from mining to power generation.

+-----------------------------------------------------------------------+
|                    COAL INDUSTRY CAPITAL FLOWS                        |
+-----------------------------------------------------------------------+
                                   |
         +-------------------------+-------------------------+
         |                                                   |
         v                                                   v
+-------------------------------+               +-------------------------------+
|        DIRECT LENDING         |               |         UNDERWRITING          |
|  - Corporate Loans            |               |  - Corporate Bond Issuance    |
|  - Revolving Credit Lines     |               |  - Equity Underwriting        |
|  (On-Balance-Sheet Risk)      |               |  (Off-Balance-Sheet Facilitation)
+-------------------------------+               +-------------------------------+
         |                                                   |
         +-------------------------+-------------------------+
                                   |
                                   v
+-----------------------------------------------------------------------+
|                        THERMAL COAL EXTENSION                         |
|  - Mine Expansion  - Plant Operation  - Supply Chain Infrastructure   |
+-----------------------------------------------------------------------+

Institutional Breakdown: High-Profile Signatories

The Urgewald data highlights several prominent founding institutions that maintained active, large-scale financial ties with coal operators between 2022 and 2025:

The Alliance Polarization Metric

One of the report’s key findings is the binary split among NZBA signatories that financed coal between 2022 and 2025:

• 50% of Coal-Active NZBA Members: Reduced their net capital allocation and underwriting volume to thermal coal companies, aligning with recommended transition pathways.
• 50% of Coal-Active NZBA Members: Maintained or increased their combined lending and underwriting volume, effectively offsetting the reductions made by peer institutions.

This divergence reveals a core vulnerability in voluntary self-regulation: without mandatory, standardized exclusion policies, capital withdrawn by one bank can quickly be replaced by another within the same alliance.

Official Statements and Institutional Responses

The findings have drawn criticism from environmental organizations and civil society, alongside defensive responses from banking representatives and climate alliance organizers.

Environmental Research Perspective

Katrin Ganswindt, Head of Financial Research at Urgewald, sharply criticized the gap between bank public relations campaigns and capital allocation:

"The Net-Zero Banking Alliance was presented as a turning point for global finance. Yet, our data reveals that key founding banks continue to pump tens of billions of dollars into thermal coal expansion. Setting a target for 2050 is meaningless if you continue to bankroll the world’s primary climate driver today. What we are witnessing is not a managed transition, but a structural protection of fossil-fuel revenue under a green halo."

Financial Sector Defense

In response to inquiries regarding coal transaction volumes, representatives from major target institutions frequently point to internal policy frameworks, client engagement strategies, and global energy market conditions.

A spokesperson for a major European investment bank cited in the context of coal phase-outs stated:

"Our commitment to achieving net-zero financed emissions by 2050 remains firm. Our policies strictly limit direct project finance for new thermal coal mines and unabated coal-fired power plants. However, our strategy prioritizes active engagement over immediate, blanket divestment. We work closely with energy clients to finance their low-carbon transitions, which often requires maintaining financial services as they reallocate capital away from legacy assets."

Similarly, US banking executives off the record point to the dual imperatives of global energy security and fiduciary responsibility, arguing that abrupt withdrawal of capital from energy companies during a global supply shock risks macroeconomic instability.

Alliance Leadership & Regulatory Context

Spokespersons operating within the UN and GFANZ ecosystems acknowledged the need for clearer standards, while pointing to ongoing refinements in alliance guidelines:

"The NZBA was established to build a framework for carbon accounting and decarbonization targets where none previously existed. Voluntary initiatives are step one; however, ensuring accountability requires continuous updates to governance protocols. We are actively tightening guidelines regarding capital markets underwriting and thermal coal phase-out timelines to ensure members’ short-term actions match their long-term commitments."

Future Outlook

The findings of the Urgewald report mark a turning point for private sector net-zero alliances. As voluntary climate commitments face increasing skepticism from investors, regulators, and civil society, the landscape of global climate finance is entering a phase defined by heightened regulatory scrutiny and legal accountability.

                    FUTURE SCENARIOS & TRENDS
                               │
       +-----------------------+-----------------------+
       │                                               │
       v                                               v
[REGULATORY ENFORCEMENT]                      [MARKET REALIGNMENT]
 - EU CDDD & ESG Rules                         - Volatility in Coal Financing
 - ECB Capital Surcharges                      - Legal Litigation & Liability
 - Mandatory SEC Disclosures                   - Mandatory Phase-out Mandates

1. Mandatory Regulation Replacing Voluntary Pledges

The failure of industry-led voluntary alliances to curtail coal financing is accelerating a shift toward hard-law regulations:

• European Union: The implementation of the Corporate Sustainability Due Diligence Directive (CSDDD) and strict ESG disclosure mandates under SFDR (Sustainable Finance Disclosure Regulation) will force banks operating in Europe to legally substantiate their sustainability claims.
• Central Bank Supervision: The European Central Bank (ECB) has repeatedly warned that financial institutions failing to manage climate-related transition risks face capital surcharges and administrative penalties.

2. Legal Risks and Greenwashing Litigation

With data explicitly linking NZBA signatories to continued fossil fuel expansion, regulatory agencies—such as the US Securities and Exchange Commission (SEC) and European consumer protection boards—are increasingly targeting "greenwashing." Shareholder activists and public-interest legal groups are using public net-zero pledges as legal baselines to bring misrepresentation and breach-of-fiduciary-duty lawsuits against corporate boards.

3. The Structural Re-engineering of Climate Alliances

To maintain institutional credibility, global climate alliances like the NZBA face pressure to overhaul their internal rules. Key reforms currently under debate include:

• Mandatory Underwriting Inclusion: Expanding target-setting requirements to cover all investment banking operations, closing the market loophole for corporate bond issuances.
• Immediate Exclusions: Transitioning from flexible client engagement policies to absolute, non-negotiable exclusions for companies actively expanding thermal coal assets.
• Expulsion Mechanisms: Establishing clear rules to suspend or expel member institutions that fail to demonstrate consistent, measurable reductions in fossil fuel financing.

Conclusion

The disclosure that founding members of the Net-Zero Banking Alliance continued to finance coal highlights the inherent limits of voluntary climate action within the global financial system. As the physical impacts of climate change accelerate, the financial sector faces an ultimatum: align capital flows with the scientific realities of decarbonization, or face an aggressive regime of state-enforced regulatory mandates designed to force that compliance.