Will finance deliver on climate?

A sector at crossroads: retreat and hope

2023 saw banks and asset managers worldwide espousing strong net zero strategies, aligning with the Paris Agreement. Fast forward to 2026, there has been a marked retreat. “Most banks in the US and Europe are neglecting their climate emissions, and the Net Zero Banking Alliance (NZBA) has become toothless,” van Dijk notes.

Yet, there are also positive developments, such as the updated guidance from the Science Based Targets initiative (SBTi) that now calls on banks to cease financing new oil and gas fields by 2030. “It’s not perfect, but it’s progress”, says Van Dijk, “if only it had come five years earlier,” she adds. Renon concurs, observing that “what we are seeing is a reality check - the difference between ambitious net zero promises and the hard realities of financial flows, which are still heading in the wrong direction.” With USD 900 billion channelled annually toward fossil fuels, global finance is failing to support a sustainable transition.

A matter of accountability: taking banks to court

Dutch environmental organisation Milieudefensie has become renowned for its climate litigation, having previously sued Shell and now focusing on Dutch bank ING. Why target ING, rather than even bigger global financiers? For Van Dijk, the rationale is clear: “ING is the largest and most polluting bank in the Netherlands, with EUR 30 billion in outstanding loans to the fossil sector - many of which are financing expansion into new oil and gas fields. Their financed emissions go through the roof and around 70% of those emissions aren’t covered by any reduction targets. ING is a major driver in deciding whether what grows in society is windmills or oil fields.”

Triodos Bank, on the other hand, has refused to finance fossil fuels since its inception in the 1980s, choosing instead to “finance the energy transition and invest in innovative clean energy projects,” said Renon. He acknowledges that climate litigation can be “a powerful lever for change,” but cautions that it can have a chilling effect, making banks more risk averse and potentially less transparent. Van Dijk also sees these drawbacks, admitting that “It shouldn’t be needed for small organisations like ours to sue massive banks. Strong government regulation would be preferable. But in the absence of sufficient action by banks and regulators, legal action is our only lever.”

Rethinking ‘Net Zero’ and Triodos’ new strategy

Triodos Bank itself has revised its climate strategy, withdrawing from the NZBA and abandoning its net zero pledge. Renon explains: “Changing regulation and definitions made claiming net zero by 2035 impossible. Rather than diluting our ambition, we decided to double down on absolute emission reductions, aiming for a 42% cut by 2030 across all lending and investment activities, with no reliance on offsets or accounting tricks. We also set targets for nature-based solutions and clean energy deals, emphasising direct climate impact over symbolic membership of alliances.”

Van Dijk welcomes Triodos’ decision to drop net zero. “Net zero can mask the reality of emission reductions with vague promises of offsetting. Absolute reductions are essential if we’re to prevent dangerous climate change.” She does, however, advocate for further progress, especially in extending absolute reduction targets to ‘scope 3’ emissions - the indirect emissions that often dwarf direct ones.

Divestment or engagement: a no-brainer?

Always a heated discussion topic is whether financial institutions should continue engaging with fossil fuel companies to drive sustainable change, or whether they should divest and cut ties altogether. Van Dijk acknowledges the value of engagement, arguing it’s preferable to try to influence clients toward sustainability where possible. But decades of engagement have yielded little to no significant change, with fossil fuel production only increasing. “At some point you should just realise that you've been sipping tea with these people for years and that it's hopeless. And then I think the only thing you can do as a bank is to divest.”

Nierop adds some nuance here, noting that excluding harmful activities may seem like a simple solution, raising the concern that doing so may allow financial institutions to merely support “good” companies rather than invest effort in transitioning the problematic ones. He adds that fossil fuels are still needed during the transition to greener alternatives.

Renon replies that sticking to clear investment norms and divesting from fossil fuels is challenging, but essential. “Money is not neutral and taking a firm stance is critical. Some continued fossil use is unavoidable, but there is no need for new investment in oil, gas, or coal. Existing reserves are sufficient for the transition, as stated by the International Energy Agency. Divestment is not just justified but necessary - both to align with climate goals and to avoid perpetuating an unsustainable and risky economic dependence.”

Clean energy for sustainable growth: the Global South

The fact that no new investments in fossil fuels are needed, raises the question how to ensure no further financing for oil and gas projects, especially in developing countries that argue fossil fuels are still necessary for economic growth. Van Dijk points to the historical irony: developed nations grew wealthy through fossil fuel use, often to the detriment of the global south, but now urge developing countries to avoid similar paths for environmental reasons. She argues that what is truly needed is access to energy, which can be provided through multiple sources, including renewables. “Developed nations must support the global south’s economic development by facilitating access to clean energy alternatives.” Both Van Dijk and Renon agree that this approach allows for growth without exacerbating climate change, ensuring developing countries are not hindered, while new investments in fossil fuels are avoided in favour of more sustainable energy solutions.

Looking ahead: optimism with action

Despite setbacks, positive signals are emerging. Dutch pension funds, among the largest globally, have been leading divestment from fossil fuels, sending “an important signal to the sector”, according to Renon. Regulators are recognising climate risk, with institutions like the European Central Bank introducing fines for poor climate risk management. Van Dijk hopes this momentum among regulators and pension funds will soon be matched by insurers and banks.

When asked for their vision of the future, Renon embraces optimism: “Strong climate action is the only sensible path - economically, geopolitically and morally.” Van Dijk, too, is hopeful, provided real action follows. She emphasises the importance of citizens holding banks accountable, calling on individuals to challenge the use of their savings for destructive activities. “When enough people step up and say banks really should take responsibility now, I'm positive that that will happen.”

Their conversation signals a sector at a crossroads. Voluntary commitments have faltered, but growing regulatory scrutiny, grassroots activism, and bold strategies from parties like Triodos Bank offer reasons for hope. As Karel Nierop concludes “We're the generation that needs to make it happen for the next generation. So let's just do that.”