The Science-Based Targets initiative (SBTi) has announced the release of the Financial Institutions’ Near-Term Criteria V2 (FINT Criteria V2), scheduled to be in effect from 30 November 2024. The primary purpose of these updated criteria and resources is to empower financial institutions (FIs) to establish more ambitious short-term emission reduction targets by aligning the criteria with the SBTi Corporate Net-Zero Standard. The minimum scope 1 and 2 mitigation ambition is being raised from well-below 2°C to 1.5°C.
Consequently, for financial firms with approved targets, the timeframe for reducing Scope 1 and 2 emissions has been reduced from 5-15 years to 5-10 years. To provide additional information about these new resources, SBTi is planning to conduct two webinars on 12 June 2024.
The updated criteria also aims to enhance clarity, actionability, and usability of existing criteria, streamline coverage requirements, and introduce criteria for the new Fossil Fuel Finance Targets method option to disclose, halt, transition and phase out FIs’ fossil fuel–related activities.
The revisions are set to come into effect later this year, and financial institutions that submit targets before this date can choose to be assessed against either FINT Criteria V2 or the Criteria and Recommendations for Financial Institutions Version 1.1.
However, for financial institutions with SBTi-validated targets, it is imperative to note that they must update their targets against the latest criteria within five years from their validation date. Additionally, the SBTi is also working on developing a Financial Institutions Net-Zero Standard to enable financial institutions to develop both near and long-term science-based targets in line with net-zero. More updates on this work are expected in the coming months.
The initial framework for the financial sector, known as the SBTi Financial Institutions’ Near-Term Criteria Version 2.0, was unveiled in 2020 to assist banks, investors, and insurance firms in verifying that their climate targets were Paris Agreement-aligned. The SBTi defines a financial institution as an entity that generates 5% or more of its revenue from investment, lending, or insurance activities.
Under the previous framework for approved targets, organizations were required to commit to reducing their Scope 1 (direct) and Scope 2 (electricity-related) emissions at an annual rate of 4.2% to align with the 1.5°C pathway, or 2.5% annually for the ‘well below 2°C’ pathway. The requirements for setting Scope 3 targets varied depending on the types of assets and investments held by the organization.
Several apparel companies, such as UK retailer New Look and US brand Levi Strauss & Co, adhere to SBTi targets. In fact, Levi Strauss’ net-zero targets for 2050 were recently approved by SBTi on 17 May.
The new suite of revisions and resources introduced by the SBTi represents a proactive approach to encouraging financial institutions to set more ambitious targets for reducing emissions and aligning their efforts with the goal of limiting global warming to 1.5°C. It is evident that these developments will play a pivotal role in advancing the collective efforts of financial institutions in addressing climate change.