Banks have made “little progress or weakened action on climate change”, according to
new research published today (22 October 2025) by the
TPI Global Climate Transition Centre (TPI Centre) at the London School of Economics and Political Science (LSE).
In its ‘
State of the Banking Transition 2025’ report, the TPI Centre evaluated banks’ climate policies using 77 sub-indicators grouped into 10 areas, called the
Net Zero Banking Assessment Framework (NZBAF). Their Carbon Performance for Banks assessment also tracked which sectors and business activities banks set targets on and whether their sectoral decarbonisation pathways align with the Paris Agreement temperature goals.
For the
report, the TPI Centre analysed 36 of the largest banks by market capitalisation and total assets, revealing that “banks are still at an early stage of their transition with decarbonisation targets that cover a limited set of sectors and business activities.”
The authors find that banks’ “overall performance on the NZBAF is weak”. On average, banks score on only 18% of the 77 sub-indicators and the best-performing bank scores on around one-third of the sub-indicators. More worryingly, progress on the transition looks to have stalled, with 95% of the scores on the NZBAF remaining unchanged year on year.
Among banks that updated their policies, most “weakened their disclosures in areas such as net zero commitments, financing conditions for high-emission sectors and fossil fuel policies.” Some banks either fully withdrew or weakened their net zero commitments, substituting firm language such as ‘commitment’ or ‘target’ with less precise wording such as ‘ambition’ and ‘aspiration’.
The
report also states that “targets for financing directed towards climate solutions are becoming widespread, but the extent to which they contribute to real-economy decarbonisation is unclear.” Of the 36 banks they assessed, 17 have financing targets for climate solutions, but the activities eligible for this financing vary from bank to bank.
Carbon Performance analysis shows only “34% of banks’ sectoral decarbonisation pathways aligned with low-carbon benchmarks (i.e. 1.5°C or Below 2°C) in 2030.” Alignment was particularly low in the aluminium, oil and gas and steel sectors. By contrast, alignment was highest in the electricity utility sector, with 96% of bank pathways aligned with global low-carbon benchmarks, although this could partially reflect regional bias, as grids are decarbonising at a different pace in advanced and in emerging markets and developing economies (EMDEs).
The Centre also confirms that the pace at which banks have been setting new targets sharply decreased in 2024 compared to 2023 and 2022. Sectoral decarbonisation targets are now common in the banking sector but typically cover only the short term (2030) and a limited set of sectors and business activities.
Banks in EMDEs are, on average, at an earlier stage of their transition, but there are important differences within the group. In addition to the four Chinese banks assessed last year, this year, the TPI Centre also covered two banks from Brazil and two banks from India. Collectively, these eight banks meet the criteria for only 7% of sub-indicators, compared with 19% for the other 32 assessed banks . Within this group of EMDE banks, performance varies significantly: all Chinese and Indian banks score below 10%, while Brazilian banks exceed this threshold. Itaú is the frontrunner, meeting the criteria for 19% of sub-indicators which is on par with the average for non-EMDE banks.
Algirdas Brochard, Banking Project Lead, TPI Centre, said:
“Given banks' central role in the economy and their far-reaching influence on climate, their slow progress on the climate transition coupled with the recent dissolution of the Net Zero Banking Alliance suggest that the objectives of the Paris Agreement are slipping further out of reach.”
Sonja Gibbs, Managing Director and Head of Sustainable Finance, Institute of International Finance (IIF), said:
“At the IIF, we see strong demand from our members for high-quality data and analytical insights that help financial institutions navigate the transition in financial markets.
“In an increasingly fragmented policy and regulatory landscape around sustainable finance, the work being done to help understand banks’ progress and improve the transparency and availability of transition-related information is a valuable contribution to informed dialogue between banks, investors and policymakers.”
ENDS For interviews with the authors, please contact Liam Collins on l.collins4@lse.ac.uk or gri.media@lse.ac.uk.
Notes to editors 
