Finance and banking sectors are prompted to accelerate their climate action with the introduction of a new Net-Zero Standard by SBTi.
The Science Based Targets initiative (SBTi) has introduced a groundbreaking framework for the financial sector, known as the Financial Institutions Net-Zero Standard (FINZ) [1]. This standard, designed for banks, asset managers, insurers, and investors, aims to align their portfolio activities with the goal of achieving net-zero greenhouse gas emissions by 2050 [1][2][3].
The FINZ Standard is significant as it addresses the vastly larger "financed emissions" (category 15 Scope 3 emissions), which are linked to the companies and projects these institutions fund [1]. Research indicates that financed emissions can be hundreds to thousands of times greater than a financial institution’s direct emissions, making this framework transformational for climate action within the financial sector [1].
Key elements of the FINZ Standard include a clear requirement for an entity-level net-zero commitment by 2050 or earlier, with measurable near- and long-term targets for portfolio alignment [2][3]. The standard also includes explicit rules on accounting and reducing portfolio emissions, fossil fuel financing, deforestation risk assessment, and transparent public reporting [1][4].
The SBTi has validated the most near-term institution targets to date, with a nearly 50% increase year-on-year [2]. Notably, ING is the first global bank to have validated SBTi targets and has pledged to stop financing new fossil fuel projects by 2040 [3]. As of now, over 150 financial institutions have contributed to public consultations for the FINZ Standard [3].
The FINZ Standard strengthens transparency and accountability in financed emissions, including underwriting and capital markets [4]. It also offers a sector-specific roadmap for carbon impact across financial services [2]. The Sustainable Finance Observatory has welcomed the initiative's wider focus, including loans, insurance, capital markets, and portfolio investment [4].
However, the delay in phasing out fossil fuel finance until 2030 has been highlighted as a major tension by critics [4]. Some major banks like HSBC and Standard Chartered have left the SBTi climate approach due to concerns about the new standard's strictness and practicality [4].
Despite these challenges, the FINZ Standard is expected to drive financial institutions to transform their capital allocation towards low-carbon activities, effectively steering global investment flows to support the Paris Agreement climate goals [1][5]. The standard is also expected to have global relevance, affecting financial markets in developed and emerging regions alike [4].
With the ambition to scale to 20,000 companies by 2030, the SBTi, under new CEO David Kennedy, expects more growth for the FINZ Standard [3]. Nearly 135 institutions across six continents have already committed to align with FINZ, with 33 firms pilot-testing the draft standard [3]. The FINZ Standard is set to shape the future of the voluntary carbon credit market, raising the bar for carbon credit demand [3].
- The Science Based Targets initiative (SBTi) has launched the Financial Institutions Net-Zero Standard (FINZ), aiming to align banks, asset managers, insurers, and investors' portfolios with the goal of net-zero greenhouse gas emissions by 2050.
- One of the key elements of the FINZ Standard is the requirement for an entity-level net-zero commitment by 2050 or earlier, with measurable targets for portfolio alignment.
- The FINZ Standard is transformational for climate action in the financial sector as it addresses financed emissions, which can be significantly greater than a financial institution’s direct emissions.
- The FINZ Standard offers a sector-specific roadmap for carbon impact across financial services and is expected to shape the future of the voluntary carbon credit market.
- With an ambition to scale to 20,000 companies by 2030, the SBTi expects more growth for the FINZ Standard, and nearly 135 institutions across six continents have already committed to align with it.
