SBTi tweaks criteria for climate targets in the financial sector

The Science Based Targets initiative (SBTi) has revised the resources available to financial institutions looking to set verified climate targets, adding fresh criteria on fossil fuel finances and upping the minimum ambition requirements.


SBTi tweaks criteria for climate targets in the financial sector

The SBTi has chosen to update its Financial Institutions’ Near-Term Criteria framework for science-based targets in the financial sector to better align goals with its flagship Net-Zero Standard.

The framework for the financial sector was first unveiled in 2020, meaning that banks, investors and insurance firms could verify that their climate targets were Paris-Agreement-aligned.

The old framework for approved targets made organisations commit to reducing 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 varied based on the kinds of assets in which the organisation has holdings.

The changes unveiled this week (28 May), include an increase in ambition to 1.5C and the introduction of fossil fuel finance criteria while seeking to improve clarity for the sector.

Financial firms with validated targets will have a reduced timeframe window for Scope 1 and 2 emissions, down from 5-15 years to 5-10 years. Where applicable, the minimum sectoral requirements will be raised from “well-below 2C” targets to 1.5C alignment.

The new criteria will come into effect as of 30 November 2024.

The SBTi also confirmed that it is developing a  Net-Zero Standard for the sector to enable financial institutions to develop near and long-term goals aligned with the net-zero movement. The SBTi will provide updates on the development of this standard “in the coming months”.

PwC’s 27th Annual Global CEO Survey, published earlier this year, found that chief executives at financial services firms worldwide are increasingly prioritising environmental sustainability even at the cost of reduced profits.

While 30% of chief executives in the financial services sector now recognise climate change as a significant factor for corporate transformation in the next three years, only half of financial services firms are actively engaged in creating climate-friendly products as part of their commitment to sustainable solutions.

Additionally, while there’s a growing need for climate-related expertise, just under half of the firms are actively investing in enhancing the green skills of their existing workforce.

SBTN

In related news, the Science Based Targets Network (SBTN) has announced the appointment of the Accountability Accelerator to host validation services for climate and nature targets.

As SBTN’s interim assurance provider, the Global Commons Alliance Accountability Accelerator (GCAAA) will evaluate each company submitting science-based nature targets for validation through an independent expert review process.

The SBTN launched its frameworks for such targets last year. The first 17 companies to commit to setting targets were AB InBev, Alpro (part of Danone), Bel, Carrefour, Corbion, GSK, H&M Group, Hindustan Zinc Limited, Holcim Group, Kering, L’OCCITANE Group, LVMH, Nestlé, Neste Corporation, Suntory Holdings Limited, Tesco and UPM.

The SBTN’s executive director Erin Billman said: “Achieving global net-zero ambitions won’t be possible without halting and reversing nature loss. Science-based targets for nature are a vital means for enabling companies to take ambitious, measurable action on climate and nature in tandem, for the long-term resilience of business, people and planet.

“The Accountability Accelerator becoming host of SBTN’s target validation process marks a vital step in safeguarding the integrity of the targets and ensuring an independent and rigorous evaluation process.”

Related news: Science-based targets for nature launched for businesses

Related news: Finance CEOs starting to prioritise long-term sustainability over short-term profits, survey finds

Comments (1)

  1. Richard Phillips says:

    The UK is well aware of the carbon dioxide problem, but we are only a tiny part of the world.
    Could we have news of the efforts made by the rest of the world?
    Is CO2 rising, stable, or falling?
    We are not alone!!!!

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