FINANCIAL INSTITUTIONS

The SBTi defines a financial institution as an entity that generates 5% or more of its revenue from investment, lending or insurance activities. This includes banks, asset managers, private equity firms, asset owners, insurance companies and mortgage real estate investment trusts.

Real economy companies that have more than 5% of their revenue from financial activities are encouraged to use the Financial Institutions’ Near-Term Criteria V2 to set targets on those activities in addition to their corporate targets under the Corporate Net-Zero Standard.

Commercially-operated private and public financial institutions (including public pension funds and sovereign wealth funds) may set science-based targets with SBTi.

The SBTi's wholly-owned subsidiary, SBTi Services, checks and validates the science-based targets of corporates, financial institutions, and small and medium-sized enterprises (SMEs).

By validating your targets with SBTi Services you will:

• Demonstrate that your climate goals are robust and credible to investors and customers.
• Ensure your targets for reducing emissions are aligned with the latest climate science.
• Gain reassurance that your goals will remain relevant in the near- and long-term through re-validation by SBTi Services following mandatory target recalculation.

So what are you waiting for? Visit the SBTi Services website to get started today!

The main stages of the Financial Institutions’ Near-Term Criteria V2 project were as follows

• Project initiation: The project started in April 2022.
• Public consultation: The SBTi ran a public consultation on a draft from June-August 2023.
  
• Pilot testing: Pilot testing of the revised draft occurred from December 2023-February 2024.
• Final publication: The final criteria were published in May 2024.
  
• Mandatory use: From 1st December 2024, financial institutions are required to use Version 2 of the criteria.
  

Find out more about the development of the criteria in the launch webinar and explainer blog.

Organizations that have validated near-term targets (either V1.1 or V1.2) do not immediately need to update their targets in line with V2, but are welcome to do so. Instead, these financial institutions are required to update their targets according to the latest available criteria or standard within five years from the date of target approval.

The SBTi is allowing financial institutions that have publicly committed to setting a near-term science-based target to extend their submission deadline until six months after the publication of the Financial Institutions Net-Zero Standard.

This extension is intended to allow the coordination of near-term and net-zero target development for SBTi assessment. It is available to all publicly committed financial institutions with an active near-term commitment deadline up to six months after the Financial Institutions Net-Zero Standard publication. The extension is optional.

Financial institutions that wish to partake of this extension must inform the SBTi prior to their current public expiration date. They may notify the SBTi by sending an email to commitment@sbtiservices.com.

Financial institutions with near-term science-based targets that have been validated by the SBTi will not be required to take further action until the expected revision of their targets five years after their validation.

All financial institutions net-zero commitments are due 24 months after the release of the Financial Institutions Net-Zero Standard.

SBTi criteria for financial institutions setting near-term targets

• Financial Institutions' Near-Term Criteria V2

Also translated into:

• Arabic
• French
• Japanese
• Mandarin
• Portuguese
• Spanish

Please note that all targets must be submitted in English.

• Private Equity Sector Science-Based Target Guidance V

Supplementary resources for financial institutions setting near-term targets

Alongside the Financial Institutions’ Near-Term Criteria V2, the SBTi has released a number of other documents to assist financial institutions wishing to commit or transition to using this criteria. These are:

• SBTi Criteria Assessment Indicators: Outlines the major checks conducted by SBTi Services during the validation process.
• SBTi Financial Institutions Target Submission Form V2.1: The form that target setting entities need to complete for validation purposes.
• Financial Institutions' Near-Term Criteria V2 Explanatory Document: Provides practical guidance to those using the criteria.
• Financial Institutions' Near-Term Criteria V2 Main Changes Document: Summarizes the development process, outlines the main updates from V1 to V2 and sets out the key issues and concerns that were addressed.

Miscellaneous resources

• Net-Zero Asset Owners Alliance and SBTi Finance Comparison Table
• SBTi Financial Sector and TCFD Reporting Guidance

Target-setting tools for financial institutions with 1.5°C-aligned targets

The Corporate Near-Term Tool models targets with a 1.5°C ambition. It was developed for companies and can be applied to sector-level components of financial institutions’ portfolios, including power and cement.

Financial institutions seeking to set 1.5°C-aligned targets on emissions related to other sectors with SBTi guidance available should refer to the applicable sector-specific tools on the sector webpages listed below:

• Air Transport
• Buildings
• Forest, Land and Agriculture
• Land Transport
• Maritime Transport
• Steel

Target-setting tool for financial institutions with below 2°C- aligned targets

The Science-based target setting tool is for use only by financial institutions who want to model targets with a well-below 2°C ambition, and is to be applied to sector-level components of financial institutions’ portfolios.

For those using the Financial Institutions Near-term Criteria V2 to set targets, the tool can be used for the following sectors:

• Aluminium
• Pulp and paper

SBTi’s Finance Temperature Scoring & Portfolio Coverage Tool - the ‘Finance Tool’

The SBTi’s Finance Temperature Scoring & Portfolio Coverage Tool (Finance Tool) helps financial institutions assess the temperature alignment of current emissions reduction targets, commitments and investment and lending portfolios. It is based on the temperature scoring methodology developed by CDP and the World Wide Fund for Nature.

Temperature scores used for targets that are submitted to the SBTi Services for validation may be calculated using the SBTi’s Finance Tool or using other third-party tools using the temperature scoring methodology.

Help with the Finance Tool

• Finance Tool User Guide
• Finance tool demonstration
• Finance Tool user workshop recording and slides
• Finance Tool tech deep dive recording and slides

Useful information on the Finance Tool

• Finance Tool repository (Github)
• Technical Documentation (Online)
• Data Requirements: Portfolio Data Template and Company Data Template
• CDP-WWF Temperature Rating Methodology
• Getting Started Using Python
• Temperature Scoring Analysis Workflow Example

For queries relating to target setting for financial institutions, please contact financialinstitutions@sciencebasedtargets.org.

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