SBTi launches initiative to define net-zero targets for financial institutions

The Science Based Targets initiative (SBTi), the global body enabling businesses to set emissions reduction targets in line with climate science, is publishing a Net-Zero Foundations for Financial Institutions paper.

Financial institutions with US $130 trillion in assets under management are now committed to reaching net-zero emissions before 2050.

However, a science-based approach is needed for them to set consistent net-zero targets with emissions reductions in line with the Paris Agreement and 1.5°C.

 The Foundations paper paves the way for the SBTi’s Net-Zero Standard for Financial Institutions, which is due to be launched in early 2023 to bring the clarity and scientific basis the sector needs to align with net-zero by 2050.

The paper addresses key issues for financial institutions; specifically, a standard definition for net-zero, the use of offsets and carbon credits and fossil fuel phase-out approaches. The Standard development process will incorporate the latest climate science and methodologies to drive change in the real economy and deliver solutions.

Dr. Luiz Fernando do Amaral, SBTi Chief Executive Officer (CEO), said: “Financial institutions are critical players in driving real-economy emissions reductions through investments and lending activities.”

The SBTi is calling on financial institutions to engage in the Standard development process and set near-term science-based targets as the first step in achieving net-zero. Over the next year, the SBTi will develop a Net-Zero Standard for Financial Institutions through multi-stakeholder consultations, road-testing of methodologies and a robust technical review with a Financial Net-Zero Expert Advisory Group (EAG).

There are already 19 financial institutions with approved science-based targets aligned with 1.5°C, including Schroders (British asset manager), La Banque Postale (French bank), KB Financial Group (South Korean bank) and EQT (Swedish private equity firm). What’s more, as of April 2022 over 50 financial institutions are committed to setting net-zero targets and more than 140 additional financial institutions are committed to setting near-term targets.

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