Science-based targets for financial sector unveiled
Banks, investors and insurance firms will now be able to verify that their climate targets are Paris-Agreement-aligned through the Science-Based Targets Initiative (SBTi).
This is because the SBTi has today (1 October) launched its framework and validation service for financial institutions.
The framework, developed with input from CDP, WWF, the World Resources Institute (WRI) and the UN Global Compact (UNGC), covers financial firms’ direct operations, supply chains and the impact of the companies and projects held in their portfolios. On the latter, it emphasises the importance of engagement with the businesses behind held assets, calling on financial firms which sign up to leverage their position as shareholders to drive climate action beyond their direct impact.
Approved targets will see organisations committing to reduce their Scope 1 (direct) and Scope 2 (power-related) emissions by 4.2% annually under the 1.5C pathway and 2.5% annually under the ‘well below 2C’ pathway. Scope 3 target requirements will vary based on the kinds of assets which the organisation has holdings in.
To date, 55 financial institutions have committed to setting SBTi-verified climate targets, with many having informally voiced their support for the Initiative back in 2015. They will now have 24 months to receive the seal of approval. The largest UK-based organisation to have made this commitment is Standard Chartered, which notably sits on the Taskforce for Nature-related Financial Disclosures and Mark Carney’s Taskforce on Scaling Voluntary Carbon Markets.
The SBTi said in a statement that the first 20 submissions be assessed free of charge. The framework will then be fine-tuned, with a formal update due in April 2021.
“The SBTi’s framework highlights the power of financial institutions to redirect capital to companies contributing to the low-carbon transition, and away from those that contribute to climate change,” WRI director Cynthia Cummins said.
“The finance sector now can, and must, build the bridge to a net-zero emissions economy and enable system-wide improvements based on climate science.”
WWF notably released a film this month detailing the ways in which the financial sector has contributed to climate change and nature loss historically and the actions it must now take to transform and become a force for good.
The announcement from the SBTi comes shortly after it issued its first guidance on a forthcoming framework for verifying net-zero targets. The paper notes that net-zero targets must be consistent with the 1.5C trajectory while neutralising the impact of any sources of residual emissions that cannot be eliminated.
New research from Data-Driven EnviroLab and the NewClimate Institute proves just how rapidly the corporate net-zero movement has taken off. The organisations’ ‘Accelerating Net-Zero’ report reveals that 1,541 businesses globally have set net-zero targets of some kind, up from 500 in December 2019. During the same time period, the number of regions with net-zero targets rose from 11 to 101, and the number of cities from 100 to 823.