Financial institutions will, for the first time, be able to set science-based targets aligned with net-zero, following the release of the Science Based Targets initiative's (SBTi) Financial Institutions Net-Zero Standard today.

The Standard provides clear, actionable science-based guidance for banks, asset owners and managers, private equity firms and other financial institutions to align their lending, investment, insurance, and capital markets activities with limiting global warming and achieving net-zero by 2050 at the latest.

By setting targets against the Standard, financial institutions can set a clear route to build resilience, meet evolving stakeholder expectations, manage climate-related risks, and capitalize on emerging opportunities - positioning themselves as leaders in the global transition to a net-zero economy.

Crucially, the Standard empowers institutions to play a catalytic role by enabling and emphasizing portfolio alignment with net-zero, using alignment targets to incentivize them, in the near-term, to support high-emitting sectors, increase the share of climate-aligned financial activities across their portfolio, and leverage their influence to drive real-world decarbonization.

The Standard is fully aligned with the SBTi’s flagship Corporate Net-Zero Standard, as well as other relevant sector-specific standards and guidance, supporting integration into existing risk and investment processes.

Key innovations of the new Standard include:

• Expanding asset class coverage to ensure broad applicability.
• Requiring the improvement of the quality and transparency of emissions inventories.
• Allowing financial institutions the option to focus on the net-zero alignment of their customers, as an alternative to setting pathways for financed emissions.
• Providing guidance on decarbonizing the built environment.

Recognizing the unique complexities financial institutions face, the Standard also addresses key climate challenges through requirements focused on the most emission-intensive activities, including:

• Addressing deforestation exposure: There are expectations for financial institutions to assess, monitor, disclose and address deforestation exposure in their portfolios, with an engagement plan required to address significant risks.
• A fossil fuel transition policy requirement: It sets out clear steps and timelines for ceasing new financial activities and insurance services to the fossil fuel industry.

Created in close consultation with financial institutions, the Standard underwent two public consultations, pilot testing by more than 30 financial institutions, and extensive input from an expert group of independent specialists across NGOs, academia, and industry. Building on the success of the SBTi’s Financial Institutions Near-term Criteria, this well-tested Standard has already generated strong market demand, with nearly 135 financial institutions across six continents having committed to set net-zero targets against it.

Alberto Carrillo Pineda, Chief Technical Officer at the SBTi, said:
“Financial Institutions have the ability to play a transformative role in the transition to net-zero. Their influence on the global economy and ability to engage with their portfolios is unparalleled to accelerate the net-zero transition. With its broad applicability and flexibility, this robust, science-based Standard will help financial institutions drive the net-zero transformation all over the world.”

A summary of the Standard and more information on how to set targets is available in the SBTi’s Financial Institution Net-Zero Standard in Brief. The SBTi will also be running a deep-dive webinar on the Standard, to explore the key elements of the new Standard and learn how to use it to set targets. It is open-to-all and participants can already register and pre-submit questions.

KeyFacts Energy Industry Directory: SBTi