Financial sector climate action accelerated with introduction of Net-Zero Standard by SBTi
The Science Based Targets initiative (SBTi) has unveiled the Financial Institutions Net-Zero Standard (FINZ), a groundbreaking framework designed to help financial institutions align their lending, underwriting, and investment activities with net-zero greenhouse gas emissions by 2050 or earlier.
The FINZ Standard, a science-based, measurable, and verifiable framework, focuses on the financed emissions embedded within financial portfolios (Scope 3 emissions), which are indirect emissions related to the institution's financial activities rather than just their direct operations (Scope 1 and 2).
The wide-ranging impact of the FINZ Standard is evident in its core commitments and actions. Financial institutions are required to make an entity-level net-zero commitment by 2050 or earlier, publish a climate transition plan, and introduce a fossil fuel transparency policy, among other measures.
One of the key aspects of the FINZ Standard is its emphasis on businesses seeking finance. These entities must disclose greenhouse gas emissions data and have credible, measurable, and verifiable decarbonization plans to secure access to capital aligned with net-zero goals.
The FINZ Standard applies to banks, asset managers, insurers, and investors, and it strengthens transparency and accountability in financed emissions, including underwriting and capital markets. The standard tackles Scope 3 category 15 emissions, those tied to clients and invested companies, which until now, most net-zero frameworks have overlooked.
Signatories to the FINZ standard must immediately stop financing new coal and oil field expansion. Financing for new oil and gas projects must end by 2030. The standard also sets rules on portfolio emissions, fossil fuel finance, deforestation risk, and reporting.
The FINZ Standard offers a sector-specific roadmap for carbon impact across financial services, and many have praised the approach as both rigorous and practical. The standard aims to transform the finance industry's alignment with global climate goals and steer clean capital flows.
With nearly 135 institutions across six continents having committed to align with FINZ, the SBTi aims to scale to 20,000 companies by 2030. The FINZ Standard raises the bar for carbon credit demand, shaping the future of the voluntary carbon credit market.
The SBTi has validated the most near-term institution targets to date, with expectations for more growth under new CEO David Kennedy. The initiative also sees a small role for carbon removals, especially for long-term storage options like direct air capture or biochar, but usually doesn't let carbon offsets replace real emissions cuts.
In summary, the FINZ Standard provides a rigorous net-zero target-setting and validation process for financial institutions, ensuring their financial flows support the global 1.5 °C climate pathway by systematically reducing financed emissions in their lending, underwriting, and investment portfolios.
- The Science Based Targets initiative (SBTi) has revealed the Financial Institutions Net-Zero Standard (FINZ), a new framework aiming to help financial institutions invest in a manner consistent with net-zero greenhouse gas emissions by 2050 or sooner.
- The FINZ Standard emphasizes the carbon removal aspect, requiring businesses seeking finance to disclose and have viable decarbonization plans, which may involve techniques like direct air capture or biochar.
- The policy implications of the FINZ Standard are significant, with financial institutions being mandated to introduce a fossil fuel transparency policy, publish a climate transition plan, and make an entity-level net-zero commitment.
- The FINZ Standard's impact extends beyond the finance industry, shaping the future of the voluntary carbon credit market and potentially raising the bar for carbon credit demand, as outlined in the initiative's goal to scale to 20,000 companies by 2030.
