SBTi Publishes Net-Zero Standard for Banks and Institutional Investors

The Science Based Targets initiative has released its Financial Institutions Net-Zero Standard, setting science-aligned requirements for banks, asset managers, insurers, and capital markets participants to reach net zero across their lending and investment portfolios. The standard requires financial institutions to immediately end project finance for new fossil fuel projects and phase out financing for oil and gas expansion companies by 2030.

Under the new FINZ Standard, institutions must first commit to net zero by 2050 and identify in-scope financial activities defined as those comprising 5 per cent or more of revenues, with fossil fuels as the highest-priority segment. They must then set base-year assessments covering a GHG emissions inventory, the climate alignment share of each activity, and the ratio of clean energy to fossil fuel exposure. A no-deforestation assessment requiring disclosure of portfolio deforestation exposure by 2030 is also mandated.

The standard is designed to complement SBTi's Corporate Net-Zero Standard, which covers Scope 1, 2, and most Scope 3 emissions. By focusing specifically on financed emissions — the carbon footprint of lending and investment portfolios — it addresses a gap that allowed financial institutions to set corporate-level targets while continuing to fund emissions-intensive activities. The SBTi says 135 financial institutions have already committed to set targets against the standard.

Development of the FINZ Standard began in 2021 and involved two public consultations and pilot testing by more than 30 financial institutions. Indian financial institutions, which face growing pressure from domestic regulators and international investors on climate risk disclosure, will need to assess their exposure to fossil fuel financing and deforestation-linked portfolios as adoption of the standard spreads globally. The SBTi's real estate policy recommendation — ceasing new financing for non-zero-carbon-ready buildings — may also have implications for India's construction-finance sector.

Key figure — 135 financial institutions committed to the standard