Near-term and net-zero: Understanding the SBTi’s frameworks for financial institutions
Oct 28th 2025
The SBTi’s Financial Institutions Standards Lead, Howard Shih, explains how the Financial Institutions Near-Term Criteria and the recently launched Financial Institutions Net-Zero Standard are interconnected, as well as the key differences between the two target-setting frameworks.
Banks, insurers, investors, private equity firms and other financial institutions play a transformative role in the global economy’s transition to net-zero. Through their financial activities and capital allocation, they have the power to influence the pace and direction of decarbonization worldwide.
Both near-term and net-zero targets play vital roles in the global climate response. Near-term targets remain a required stepping stone to net-zero, providing accountability and momentum in the critical years ahead, while net-zero targets offer a clear end goal. Together, these targets establish a comprehensive and credible approach to emissions reduction, one that balances urgency and accountability with long-term vision.
The SBTi’s frameworks for financial institutions
The SBTi first published criteria for financial institutions to set near-term science-based targets in 2020. In 2024, the SBTi responded to demand from the market with Version 2 of the Financial Institutions Near-Term Criteria, which improves usability and increases the minimum ambition to 1.5°C. To date, over 170 financial institutions in over 30 countries from around the world have validated near-term targets.
To empower financial institutions to go further and set long-term targets to reach net-zero emissions before 2050, the SBTi released its first Financial Institutions Net-Zero Standard in July 2025. This Standard builds on the success of and learnings from the Near-Term Criteria, and introduces a number of innovations, including alignment targets that for the first time allows the use of third-party resources, phaseout requirements on new fossil fuel financial activities, and coverage of insurance underwriting and capital market activities.
Financial institutions may choose whether to set targets with the Financial Institutions Near-Term Criteria or the Financial Institutions Net-Zero Standard. This will remain the case until December 2026 at the earliest, during which period the SBTi will implement a monitoring, evaluation, and learning phase to assess outcomes and inform next steps. Both frameworks are globally applicable, practical to implement, and designed to guide financial institutions in future-proofing their strategies, while driving climate impact through their portfolios.
This blog is intended to provide clarity on the two frameworks.
Comparing the frameworks
Time frame of targets
A key distinction is the time horizon covered.
- The Financial Institutions Net-Zero Standard requires financial institutions to set both near- and long-term targets. Near-term targets cover up to 5 years, while long-term targets should be aligned with net-zero by 2050 at the latest.
- The Near-Term Criteria only covers near-term targets, which can run up to 5 years or between 5 and 10 years, depending on the target type.
| Financial Institutions Near-Term Criteria Version 2.0 | Financial Institutions Net-Zero Standard Version 1.0 | |
| Time frame | Near-term only
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Operational (non-portfolio) targets
Both frameworks require financial institutions to set targets covering scope 1 and 2 emissions (from direct operations).
- The Financial Institutions Net-Zero Standard requires scope 1 and 2 targets to align with the criteria in the SBTi Corporate Net-Zero Standard and/or relevant Sector Standards. Where applicable, financial institutions may also set scope 3 emissions from categories 1–14. Setting targets on scope 3 categories 1-14 is optional for entities with 95% or more of their revenue from financial activities, but required for those with less than 95% of their revenue from financial activities.
- The Near-Term Criteria includes requirements on scope 1 and 2 targets, and recommends but does not require scope 3 categories 1-14 targets.
| Financial Institutions Near-Term Criteria Version 2.0 | Financial Institutions Net-Zero Standard Version 1.0 | |
| Scope 1 and 2 |
Required in line with specifications in Financial Institutions Near-Term Criteria | Required in line with specifications in SBTi Corporate Net-Zero Standard and/or SBTi Sector Standards |
| Scope 3 categories 1-14 | Optional |
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Scope of financial activities
The Financial Institutions Net-Zero Standard broadens the scope of financial activities.
- The Financial Institutions Net-Zero Standard covers lending, separates out investing into asset owner and asset manager investing, and adds insurance underwriting and capital market activities. It also introduces a new requirement for financial institutions to publish their climate governance frameworks, detailing those responsible for the oversight and implementation of net-zero targets.
- The Near-Term Criteria covers lending and investing activities.
| Financial Institutions Near-Term Criteria Version 2.0 | Financial Institutions Net-Zero Standard Version 1.0 | |
| Financial activities covered |
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| Climate governance disclosure | Not required | Required |
Target-setting methods and policies
The Financial Institutions Net-Zero Standard incorporates metrics from existing target-setting methods in the Near-Term Criteria and adds greater flexibility and choice in terms of methods, in line with climate-ecosystem best practices. It also adds new policy requirements related to fossil fuel and deforestation.
- The Financial Institutions Net-Zero Standard introduces climate-alignment targets that can use approved third-party methodologies, which are specified in the Implementation List. It also gives financial institutions the option to set near-term sector-specific targets for emissions-intensive sectors. This flexibility allows financial institutions to select their preferred target-setting methods among the eligible climate-alignment and sector target options.
The Near-Term Criteria offers financial institutions a choice of four target-setting methods to set near-term targets. The Criteria also clearly states which of the four target-setting methods may be used for each required and optional asset class.
Financial Institutions Near-Term Criteria Version 2.0 Financial Institutions Net-Zero Standard Version 1.0 Target-setting methods Options:
- Science-Based Targets Portfolio Coverage
- Temperature Rating
- Sectoral Decarbonization Approach (SDA)
- Fossil Fuel Finance Targets (FFFT)
- Has both policy and target requirements if used
(i) Portfolio climate-alignment targets (for near- and long-term targets)
- SBTi target status (from Science-Based Targets Portfolio Coverage method) and implied temperature rise metrics (e.g., from Temperature Rating method) can count toward climate-alignment, along with the use of approved third-party methodologies and taxonomies set out in the Financial Institutions Net-Zero Standard Implementation List
OR
(ii) Sector targets for emissions-intensive sectors (for near-term targets only)
- Allows the use of physical emissions intensity (similar to SDA but with the market share parameter removed) and adds two technology share metrics (for automotive and power generation sectors)
- Extends the FFFT method option from the Near-Term Criteria with policy and target requirements for all financial institutions
Policies Fossil Fuel Finance Targets (if used) - Fossil fuel transition policy (requirement)
- Deforestation engagement plan (requirement for financial institutions with significant deforestation exposure)
- Real estate policy (recommendation)
Coverage approach
The Financial Institutions Net-Zero Standard introduces a new segmentation approach that updates target coverage requirements (i.e., the minimum percentage of financial activities that targets must cover), while prioritizing earlier action on emissions-intensive activities.
- The Financial Institutions Net-Zero Standard defines for each type of financial activity – including lending, asset owner investing, asset manager investing, insurance underwriting, and capital market activities – which portions are in-scope and out-of-scope (see Tables 1.1-1.5 on pages 47-54). For each of these financial activity types, the in-scope portions are further categorized into four segments to enable action prioritization and determine the minimum climate-alignment target ambition and coverage requirements.
- The Near-Term Criteria outlines the required, optional, and out-of-scope asset classes for financial institutions to consider when determining what their near-term targets will cover (see Table 1 on pages 15-20). It also includes separate minimum requirements for how much of each asset class, as well as the overall portfolio, are subject to targets.
| Coverage approach | Financial Institutions Near-Term Criteria Version 2.0 | Financial Institutions Net-Zero Standard Version 1.0 |
| Segmentation of financial activities | Lists required, optional, and out-of-scope asset classes for lending and investment activities |
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| Target coverage requirements |
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Going from near-term to net-zero
Targets validated under the Near-Term Criteria cannot automatically be used under the Financial Institutions Net-Zero Standard. However, this Standard provides flexibility to facilitate the transition for institutions that already have validated near-term targets. These financial institutions are well-placed to set both near- and long-term targets under the Financial Institutions Net-Zero Standard since both frameworks use compatible approaches, including SBTi target status, temperature rating scores, and physical emissions-intensity reduction targets.
Learn more
To access more resources on the Financial Institutions Net-Zero Standard and Financial Institutions Near-Term Criteria, head over to our financial institutions webpage.
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