The Science Based Targets initiative (SBTi) has called on financial institutions worldwide to help support the development of a new net-zero standard, which will be launched early next year.
A paper published yesterday by the SBTi marked the beginning of the development phase of the Net-Zero Standard for Financial Institutions, which will aim to bring the clarity and scientific basis the sector needs to align with net-zero emissions by 2050.
The document addresses several key issues, including a standard definition for net zero, the use of offsets and carbon credits, and fossil fuel phase-out approaches.
As well as helping to develop the new standard, the SBTi has also urged banks, asset owners, asset managers and other financial institutions to set near-term science-based targets as the first step in achieving net zero.
“Immediate action is already possible for short-term science-based targets,” said Dr Luiz Fernando do Amaral, SBTi CEO. “However, when it comes to net zero, there is little understanding of what it means for the finance industry.
“Our paper provides the clarity that has been desperately needed and will enable us to develop a Net-Zero Standard for Financial Institutions that will help net-zero pledges deliver science-based action.”
There are already 19 financial institutions with approved science-based targets aligned with limiting global warming to 1.5°C above pre-industrial levels, including Schroders, La Banque Postale, KB Financial Group, and EQT.
Moreover, financial institutions with $130trn (£100trn) in assets under management are now committed to reaching net-zero emissions before 2050.
The development process for the new standard will incorporate the latest climate science and methodologies, building on the SBTi’s Corporate Net-Zero Standard, which was launched last October.
Alberto Carrillo Pineda, SBTi co-founder, said: “Having launched the world’s first framework for corporate net-zero target setting in line with climate science last year, the SBTi recognises the need to create a similar standard that leverages the unique role financial institutions play in global emissions reductions.
“The SBTi's Net-Zero Standard for Financial Institutions will bring clarity to this space and ensure that the growing momentum in the financial sector translates into science-based decarbonisation in the real economy."
Image credit: iStock
Author: Chris Seekings