Will the lately introduced zero-emission standard by SBTi compel enterprises to follow through on their carbon neutral pledges?
The Science Based Targets Initiative (SBTi) has unveiled a revised corporate net zero standard, aiming to address accountability concerns and restore confidence in SBTi approved targets. The key changes focus on strengthening accountability, setting clearer, science-based pathways aligned with 1.5°C goals, and providing enhanced guidance for financial institutions.
The new Financial Institutions Net-Zero Standard, set to be released in July 2025, will enable banks, asset managers, insurers, and others in finance to set science-based net-zero targets for 2050, covering lending, investment, insurance underwriting, and capital markets activities. This marks a significant step in tailoring net-zero pathways to the unique role and influence of financial institutions.
The Standard requires financial institutions to increase their portfolio alignment with net-zero by supporting decarbonization in high-emitting sectors and restricting financing for activities counter to zero-carbon goals. It also mandates deforestation risk assessment and disclosure by 2030, with follow-up engagement plans if significant exposure is found, linking environmental considerations more explicitly to financial portfolios.
The Standard maintains alignment with SBTi’s broader Corporate Net-Zero Standard but integrates sector-specific nuances, such as scope 3 emissions, emphasizing near-term accountability alongside long-term net-zero commitments. Regarding carbon credit usage, while the revised Standard’s stance is not extensively detailed, SBTi's approach generally prioritizes robust emissions reductions as a priority and views carbon credits mainly as a residual mitigation tool after maximized decarbonization efforts have been implemented.
The potential impacts of these changes include improved transparency and public disclosure of progress and climate-related risks, increased pressure on companies to address indirect emissions and supply chain impacts, encouraging prioritization of direct emissions reductions and meaningful climate action over reliance on carbon offsets, and providing more leverage for financial institutions to drive real-world decarbonization by aligning financial flows with net-zero goals.
The revised SBTi corporate net zero standards introduce stricter, more comprehensive criteria for emissions reductions, transparency, and portfolio management, particularly extending to the financial sector. The new standard prioritizes action based on emissions-intensity in scope 3 emissions reduction, ends the use of combined scope targets by corporates, and increases flexibility in scope 3 emissions reduction.
The SBTi's new draft is now out for public consultation, and it could be a game changer, according to EDHEC climate institute's Ducoulombier. Nathan Truitt, executive vice president of climate funding at the American Forest Foundation, finds it helpful that the new standard provides companies with tools like direct mitigation using "insets" via activity pools and indirect mitigation like SAF certificates in scope 3 emissions reduction.
The SBTi's corporate net zero standard governs its endorsement of corporate transition plans. The new draft may clarify a confusion among buyers who believed SBTi actively discouraged the use of carbon credits. The SBTi's new draft marks an attempt to consolidate progress while restoring confidence, as Ducoulombier concludes.
Over 7000 companies worldwide have set Science Based Targets Initiative (SBTi) approved targets, a significant increase from just ten companies ten years ago. The new standard focuses on incentivizing and enabling companies to walk the talk, setting a clear path for businesses to contribute effectively to the global fight against climate change.
- The Financial Institutions Net-Zero Standard, set to be released in July 2025, will aid sports organizations and athletes by providing a science-based net-zero pathway for their investments and sponsorships, ensuring alignment with the global effort to combat climate change.
- Incorporating technology into lifestyle choices, such as investing in renewable energy projects or electric vehicles, can contribute significantly to a person's net-zero goals, making a tangible impact on the ongoing fight against climate change, in line with the revised SBTi corporate net-zero standards.
