SBTi Details Transition Path from Near-Term to Net-Zero for Financial Institutions

The Science Based Targets initiative published a comparison of its Financial Institutions Near-Term Criteria V2 and the draft Financial Institutions Net-Zero Standard in August 2024, clarifying how banks, insurers and investors can transition from near-term targets to long-term net-zero alignment. Over 120 financial institutions had validated near-term targets at the time, with more than 200 committed to do so.

FINT V2, published in early 2024, improves usability over the original 2020 criteria and raises the minimum near-term ambition to 1.5 degrees Celsius. It covers lending and investment activities across a defined set of asset classes, offering four target-setting methods with different timeframes and minimum ambition levels. The draft FINZ Standard, released for consultation in July 2024, incorporates the near-term requirements and adds long-term net-zero criteria, expanding coverage to insurance underwriting and capital market activities not addressed under FINT V2.

A key structural difference is how the two documents define portfolio boundaries. FINT V2 uses required, optional and out-of-scope asset classes, with separate coverage requirements per class, resulting in varying target scope across institutions. The draft FINZ Standard simplifies this to in-scope and out-of-scope categories, applying a single revenue-based coverage threshold to all in-scope activities. All in-scope activities must ultimately achieve net-zero alignment, and the draft guides institutions on prioritising activities based on climate impact and level of influence.

The draft FINZ Standard also introduces an overarching portfolio alignment target as a new, more universal approach to near-term target setting, consolidating the temperature rating and portfolio coverage methods from FINT V2. This new method enables financial institutions to direct capital toward companies already transitioning to net-zero or actively doing so. Financial institutions are encouraged to use FINT V2 to set near-term targets now and upgrade them when the final FINZ Standard is published, expected in 2025. The draft was open for feedback until 20 September 2024.

Key figure — 120+ financial institutions with validated near-term targets; 200+ committed to set them