Finance and banking sectors face a push towards climate action with the introduction of a net-zero standard by SBTi (Science Based Targets initiative).
New Global Standard Aims to Align Finance Sector with Net-Zero Emissions by 2050
The Science Based Targets initiative (SBTi) has launched the Financial Institutions Net-Zero Standard (FINZ), a groundbreaking framework designed to guide banks, asset managers, insurers, and investors towards aligning their financial activities with net-zero greenhouse gas emissions by 2050.
The FINZ Standard is the first global framework of its kind, setting clear, science-based rules and expectations to manage portfolio emissions, fossil fuel finance, deforestation risk, and climate-related reporting. Its primary focus is on financed emissions, which are often hundreds or thousands of times higher than the operational emissions of financial institutions.
The FINZ Standard is significant in its influence on the finance industry's alignment with global climate goals. It moves the sector from voluntary pledges towards verifiable, science-based climate action, requiring institutions to phase out financing for fossil fuel expansion projects by 2030, fully align portfolios by 2050, assess climate risks, and transparently report progress.
This shift towards clean investments and increased climate accountability is particularly relevant in emerging markets, such as Africa, where financial institutions are under pressure to balance development needs with climate ambition. The standard also offers options for institutions to either target financed emissions reductions or ensure their clients' net-zero alignment, broadening applicability across diverse financial actors.
The FINZ Standard has already gained support from nearly 135 institutions across six continents, with ING becoming the first global bank to have validated SBTi targets and promising to stop financing new fossil fuel projects by 2040. The Financial Institutions Near-Term Criteria (FINT) will remain valid until 2026, but new institutions are encouraged to adopt the FINZ standard now.
Under the FINZ Standard, banks and asset managers must assess their exposure to deforestation and real estate, with those at significant risk required to publish mitigation plans. The SBTi generally does not allow carbon offsets to replace real emissions cuts but sees a small role for carbon removals, particularly for options like direct air capture or biochar.
The FINZ Standard strengthens transparency and accountability in financed emissions, including underwriting and capital markets. It also raises the bar for carbon credit demand and is likely to shape the future of the voluntary carbon credit market.
The SBTi anticipates growth under its new CEO, David Kennedy, with ambitions to scale to 20,000 companies by 2030. To date, the SBTi has validated the most near-term institution targets, with a nearly 50% increase year-on-year.
Many have praised the FINZ Standard's approach as both rigorous and practical. By equipping the finance sector with a measurable framework to integrate climate targets into core financial decisions, the FINZ Standard plays a pivotal role in steering global capital markets towards supporting the Paris Agreement’s net-zero by 2050 goal.
- The Financial Institutions Net-Zero Standard (FINZ) by the Science Based Targets initiative (SBTi) aims to guide banks, asset managers, insurers, and investors towards aligning their financial activities with net-zero greenhouse gas emissions by 2050, in response to the global goal of addressing climate-change.
- The FINZ Standard requires financial institutions to phase out financing for fossil fuel expansion projects by 2030, fully align portfolios by 2050, assess climate risks, and transparently report progress, as part of its science-based approach to climate action.
- Institutions in emerging markets, like Africa, are under pressure to balance development needs with climate ambition, and the FINZ Standard offers options for institutions to either target financed emissions reductions or ensure their clients' net-zero alignment, making it applicable across diverse financial actors.
- The SBTi anticipates growth under its new CEO, David Kennedy, with ambitions to scale to 20,000 companies by 2030, demonstrating the increasing importance of environmental-science in business and finance.
- The FINZ Standard strengthens transparency and accountability in financed emissions, including underwriting and capital markets, and is likely to shape the future of the voluntary carbon credit market, as it sets clear, science-based rules and expectations for carbon removal and carbon markets.
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