Financial institutions now have a dedicated framework to align their activities with the global goal of net-zero emissions by 2050, following the launch of the Science Based Targets initiative’s (SBTi) Financial Institutions Net-Zero Standard.
For the first time, banks, asset owners, asset managers, private equity firms, and other financial entities will be able to set science-based, verifiable targets across lending, investment, insurance, and capital markets functions. The move marks a significant step towards integrating financial flows with climate goals in line with limiting global warming.
The Standard, fully aligned with the SBTi’s Corporate Net-Zero Standard and other sector-specific frameworks, offers actionable guidance to help institutions manage climate risk, meet stakeholder expectations, and harness opportunities emerging from the green transition. Central to the framework is the use of alignment targets—designed to incentivise short-term support for high-emitting sectors while accelerating portfolio-wide decarbonisation.
Key innovations include:
- Broader coverage of asset classes for increased applicability
- Requirements to enhance transparency and quality of emissions data
- Flexibility for institutions to focus on client alignment, rather than solely financed emissions
- Decarbonisation strategies for the built environment
Recognising the sector’s unique climate-related challenges, the Standard also introduces specific requirements targeting emissions-intensive activities. These include:
- Deforestation risk management, requiring institutions to monitor, disclose, and address portfolio exposure, along with engagement plans for high-risk areas
- Fossil fuel transition policies, detailing steps and timelines for phasing out financial and insurance services for the fossil fuel industry
The Standard was shaped through two public consultations, pilot-tested by over 30 institutions, and developed in collaboration with a global expert group comprising NGOs, academics, and industry professionals. More than 130 institutions across six continents have already committed to adopting the framework.
Alberto Carrillo Pineda, Chief Technical Officer at the SBTi, stated: “Financial institutions have the ability to play a transformative role in the transition to net-zero. Their influence on the global economy and ability to engage with their portfolios is unparalleled. With its broad applicability and flexibility, this robust, science-based Standard will help financial institutions drive the net-zero transformation all over the world.”
