SBTi Opens Call for Financial Institutions to Pilot its Draft Near-Term Criteria V2

KEY CHANGES IN DRAFT FINT CRITERIA V2 (vs. V1.1)

FI-C6:

• Reduced the scope 1+2 target time frame from 5-15 years to 5-10 years.

FI-C8:

• Increased the minimum scope 1+2 target ambition from well-below 2°C to 1.5°C alignment.

FI-C15 (formerly FI-C16):

• Specified that assets managed under discretionary mandates must follow the coverage requirements outlined in Table 1, while assets administered under advisory mandates are optional and assets under custody or execution-only mandates are out of scope.

• Added that FIs must cover at least 67% of its required and optional asset classes with targets (in addition to the coverage requirements outlined in Table 1).

• Added a materiality exclusion option under certain conditions.

FI-C16:

• Clarified that base year and forward-looking ambition criteria also apply to scope 3.

FI-C17.1:

• Increased the minimum Sectoral Decarbonization Approach (SDA) target ambition from well-below 2°C to 1.5°C alignment (where available).

• Noted that FIs that already only finance renewable electricity projects in the base year may set targets to continue doing so through 2030.

• Added a low emissions intensity maintenance target option for portfolios of electricity generation project finance and/or real estate assets under certain conditions.

• Added that the same base year must be used for all SDA targets.

FI-C17.2:

• Added that the same base year must be used for all Portfolio Coverage targets.

• Noted that FIs may set a second, longer-term 100% Portfolio Coverage target but only if it is in addition to one that meets the required five-year time frame.

FI-C17.3:

• Increased the minimum Temperature Rating target ambition:

  • from well-below 2°C to 1.5°C alignment for portfolio scope 1 + 2 temperature scores, and

  • from 2°C to well-below 2°C alignment for portfolio scope 1 + 2 + 3 temperature scores.

• Added that the same base year must be used for all Temperature Rating targets.

FI-C17.4:

• Added some Fossil Fuel Finance Targets interim criteria as an interim option to address FIs’ loans, investments, and assets under management in the fossil fuel sector.

Table 1:

• Added more granular specifications (e.g., by sector, listed vs. private companies, corporate vs. SME, short vs. long-term loans, direct investments vs. via funds) and clarifications.

• Raised the coverage requirement for the fossil fuel sector to 100% for all project finance, corporate loans, equity, and fixed income.

• Added that FIs may select the loan outstanding amount or loan commitment amount as the numerator of the attribution factor used to calculate financed emissions for corporate loans but shall only make the choice once during the target period.

• Added flexibility to the calculation of the 67% minimum coverage requirement for long-term loans to listed companies in “all other sectors” but any Portfolio Coverage and/or Temperature Rating target(s) that are set on corporate loans must have 100% coverage within its target boundary.

• Updated the definition of SMEs that may set targets through the streamlined target validation route.

• Added that all FIs shall cover their private equity investments based on the requirements provided in the SBTi Private Equity Sector SBT Setting Guidance (e.g., targets are only currently required if the FI has a board seat in the portfolio company, among other conditions).

• Added optionality for investments via funds for cases where the investment strategy precludes transparency on the underlying holdings (e.g., some hedge funds) and for passive index-linked funds where the asset manager did not select/design the benchmark and does not retain any voting rights.

Table 2:

• Updated the target language template.