SBTi Overhauls Finance Framework with New Net-Zero Standard for Institutions

The Science Based Targets initiative is updating its near-term framework for financial institutions and introducing a new Financial Institutions Net-Zero Standard, with draft documents set for public consultation in Q2 2023. The revisions include a new Fossil Fuel Finance Position Paper that will require FIs to address their most emissions-intensive lending and investment activities.

Since the SBTi published its first financial institution target-setting framework in October 2020, more than 60 financial institutions have used it to develop and submit near-term science-based targets, with over 150 additional FIs publicly committed to setting them. The evolving framework responds to identified challenges in the existing approach, including limitations in financed emissions data, minimum coverage thresholds, sector method availability and the treatment of managed assets. The new resources will reference the Partnership for Carbon Accounting Financials standards and align with Glasgow Financial Alliance for Net Zero initiatives to improve interoperability.

The March 2023 IPCC AR6 Synthesis Report found that finance for climate mitigation must increase by three to six times by 2030 to limit warming to below 2°C. The SBTi's updated FI framework aims to translate this imperative into concrete target-setting criteria at the asset class level. The new FINZ Standard will provide a science-based net-zero pathway for financial institutions that goes beyond the existing near-term framework, addressing operational and investment-associated emissions with a net-zero deadline of no later than 2050.

During the transition period, FIs that have publicly committed to setting science-based targets under the existing framework may extend their submission deadline until six months after the publication of FINZ Standard V1, subject to informing the SBTi before their current deadline. The existing Near-Term Framework will remain available for at least six months after the FINZ Standard V1 is published. A stakeholder review process will follow the Q2 2023 draft publications, including webinars, road testing by leading FIs, workshops and a public survey before a final version is released for implementation.

Key figure — 3 to 6 times — required increase in climate mitigation finance by 2030 (IPCC AR6)