The Science-Based Targets Initiative (SBTi) officially released the "Financial Institutions Net-Zero Standard" (FINZ, SBTi Financial Institutions Net-Zero Standard) on the 22nd, requiring financial institutions that commit to net zero in accordance with the standard to disclose their "fossil fuel transparency policy", immediately terminate financing for new fossil fuel projects, and terminate general-purpose financing for oil and gas companies involved in expansion by 2030.
Global financial circles' climate commitments turn conservative
The release of the SBTi standard comes as major global banks are withdrawing from major climate coalitions . Earlier this year, before President Trump returned to the White House, major Wall Street banks such as Wells Fargo, Goldman Sachs, and Morgan Stanley withdrew from the Net Zero Banking Alliance (NZBA), the banking industry's largest climate coalition.
BlackRock, the world's largest asset management company, also announced its withdrawal from the Climate Alliance's Net Zero Asset Manager Initiative (NZAMI), which is committed to achieving net zero emissions by 2050.
In addition to withdrawing from the NZBA, Wells Fargo also announced in February that it would cease its mid-term 2030 financing emissions targets for specific industries, as well as its goal of achieving net-zero financing emissions by 2050. This move sparked outrage from climate advocacy groups, who argued that Wall Street's financing of the fossil fuel industry was tantamount to financially supporting climate destruction.
Why is climate finance important? How can FINZ help the financial sector achieve net zero?
Climate change is increasing risks in the financial industry. Physical risks such as extreme weather lead to increased insurance claims and asset damage. In addition, net-zero policies will cause the depreciation of assets in high-carbon industries, making it difficult for the financial industry to recover loans.
SBTi states that through the Net Zero Emissions Standard for Financial Institutions, financial institutions such as banks, private equity firms, asset managers, insurance companies, and institutions involved in the capital markets will be able to set science-based reduction targets to determine how to achieve net zero emissions by 2050 or earlier. This will enable financial institutions to manage the risks of climate change on their businesses and, more importantly, influence changes in their investment portfolios to achieve net zero carbon reduction goals sooner.
For most financial institutions, the majority of their carbon emissions come from financing emissions, i.e., the carbon emissions of the companies they lend to. Although these emissions are outside the direct control of the financial institutions, it is widely recognized internationally that financial institutions can leverage their influence in the capital markets to encourage companies to reduce carbon emissions.
Alberto Carrillo Pineda, Chief Technology Officer at SBTi, said: "Financial institutions have the potential to play a transformative role in the transition to net zero. Their influence on the global economy and their ability to manage investment portfolios make them unparalleled in accelerating the net zero transition."
FINZ highlights: fossil fuels, deforestation
The FINZ standard details how financial institutions should treat fossil fuel companies. The new standard requires the financial industry to establish a "fossil fuel transparency policy," cease project financing with explicit links to fossil fuel activities, end general-purpose financing for oil and gas companies involved in expansion by 2030, and transition portfolio energy activities to net-zero emissions by 2050. The SBTi stated that this move is intended to foster a dialogue with financial institutions and their fossil fuel financing.
The FINZ standard also requires financial institutions to commit to assessing and disclosing deforestation risks in their portfolios by 2030 and to develop engagement plans to address significant risks.
Under the standard, financial institutions must also publicly report annually on their greenhouse gas emissions, climate alignment and industry indicators, clean energy versus fossil fuel exposure, and deforestation exposure. At the end of each target period (typically five years), companies must assess and communicate their progress towards their targets and, if they have not yet achieved net zero emissions, set new targets.
SBTi said the standard provides clear and actionable scientific guidance, and they have conducted pilot tests in more than 30 financial institutions, and currently 135 financial institutions have committed to setting net zero targets based on the standard.
Oil giants withdraw from SBTi expert panel, shifting pressure on climate action to the financial sector
Although FINZ emphasizes the cessation of all new project financing for oil and gas expansion, it is worth noting that the policy allows for the gradual elimination of general-purpose financing for companies involved in oil and gas expansion before 2030. This grace period is equivalent to "leaving five years of wiggle room" for the financial industry.
Climate experts have criticized financial institutions for viewing the guidelines as a floor, not a ceiling, if they really want to demonstrate net zero commitment.
On the other hand, according to a recent report released by the Rainforest Action Network (RAN) and other environmental organizations , financing provided by major global banks to the fossil fuel industry will soar to US$869 billion in 2024, an increase of US$162 billion compared to 2023.
Meanwhile, global oil giants Shell, Norway's Aker BP, and Canada-based multinational oil company Enbridge recently announced their withdrawal from the SBTi expert advisory panel, citing the SBTi's draft oil and gas standards, which mandate companies not to develop new oil and gas fields, as conflicting with their core businesses. This wave of withdrawals has also forced the development of the relevant standards to be shelved.
With oil majors withdrawing their support for the SBTi, pressure is shifting to the financial sector for more climate action. Banks and insurance companies are facing increasing pressure to stop insuring, underwriting, and investing in fossil fuel production.
Source: Reccessary
Website: SBTi發布金融淨零新標準：銀行須公開化石燃料政策，2030年全面撤資油氣擴張 | 新聞 | Reccessary
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