Guidance for the finance sector
Why take action?
Financial institutions are increasingly recognizing the extent of climate risks and their impact on every market sector. Investment and lending activities must be urgently reviewed to avoid the worst effects of catastrophic climate change and fund a climate-secure, zero-carbon future.
How to set a target
The Science Based Targets initiative’s new framework allows financial institutions – including banks, investors, insurance companies, pension funds and others – to set science-based targets to align their lending and investment activities with the Paris Agreement.
Net-Zero Foundations for Financial Institutions
Financial institutions with US$130 trillion in assets under management are now committed to reaching a state of net-zero before 2050. A science-based approach is therefore needed to financial institutions' net-zero target setting.
To support this, the SBTi has developed a foundational framework representing the first step in defining net-zero for financial institutions. A public consultation on the draft began on 10 November 2021. Stakeholder feedback informed the final publication of the net-zero for financial institutions foundations paper in April 2022.
The foundations paper will be followed by an open stakeholder process to develop actionable criteria, detailed guidance, and technical resources to support financial institutions in the formulation and implementation of their science-based net-zero targets.
New tool for temperature scoring and portfolio coverage
We have developed a data-agnostic Python library that is primarily for integration into commercial and homegrown decision support and portfolio management systems, but can also be run as a standalone solution. It is based on the temperature scoring method developed by CDP and WWF.
This tool helps financial institutions to assess the temperature alignment of current emission reduction targets, commitments, and investment and lending portfolios. This information can be used by financial institutions to develop GHG emission reduction targets for official validation by the SBTi, develop engagement strategies and help with strategic security selection and allocation decisions.
More than 55 financial institutions have publicly committed to set emissions reduction targets through the SBTi. In 2018, the SBTi launched a project to help financial institutions align their lending and investment portfolios with the ambition of the Paris Agreement. In October 2021, the first financial institutions had their science-based targets validated.
- Read our blog: A Turning Point for the Sector
- Read the strategy and theory of change that underpin the SBTi’s approach to enabling financial institutions to reduce real economy emissions and contribute to the net-zero transition through science-based targets.
World Resources Institute (WRI) is the managing SBTi partner for this project and works closely with WWF and CDP through a project core team.
Financial support for this work has been provided by Bloomberg Philanthropies, Caisse de dépôt et placement du Québec (CDPQ), ClimateWorks Foundation, Keeling Curve Prize, Hewlett Foundation, and The Bank of New York Mellon.
- Net-Zero Asset Owners Alliance and SBTi Finance Comparison Table
- Private Equity Sector Science-Based Target Guidance
- Guidance: Science-based targets for the financial sector
- SBTi Criteria and Recommendations for Financial Institutions (updated April 2021 version, a previous October 2020 version is also available in Japanese)
- Commercial Real Estate and Residential Mortgage Tool (updated April 2021 version)
- SBTi finance tool for temperature scoring and portfolio coverage
- Science-based target setting tool (version 2) – This tool was developed for companies and can be applied to sector-level components of financial institutions’ portfolios
- Financial Institution Guidance launch webinar and slides
- Private Equity Guidance walkthrough webinar and slides
- Panel Discussion on Meeting Private Equity Sector Science-Based Targets webinar and slides
- SBTi Target Submission Form and Guidance for Financial Institutions – This submission form is prepared specifically for financial institutions to input information necessary for the assessment against the sector specific criteria. It includes fields to enter s1 and 2 and s3 portfolio target information, as well as target language templates and action reporting templates.
- Science-Based Targets for Financial Institutions: Criteria Deep Dive Webinar and slides and FAQs
- Community Forum for Financial Institutions – This is the primary channel for technical and query support to help FIs on their journey to adopt SBTs on their operations and portfolio activities.
The below training modules equip financial institutions with the tools and information needed to set science-based targets. Each module covers a different aspect of setting financial science-based targets, ranging from making the business case for decarbonizing to completing target calculations.
View the full playlist of the Training Modules for Financial Institutions on YouTube, or take a look at the individual modules below:
- Module 1: The case for change
- Module 2: Voluntary finance climate action ecosystem
- Module 3: Developing SBTs: Overview
- Module 4: Developing SBTs: Scope 1, scope 2, and scope 3 operational emissions
- Module 5: Developing SBTs: Scope 3 financed emissions – Overview
- Module 6: Developing SBTs: Scope 3 financed emissions – Calculation deep dive and case studies
- Module 7: Developing SBTs: Scope 3 financed emissions – Data considerations and trade-offs
- Module 8: Validating, disclosing, and recalculating
- Module 9: Governance, change management, and meeting targets
The SBTi’s framework for financial institutions is being developed through an inclusive, multi-stakeholder process, including consultation with: an Expert Advisory Group (EAG) representing financial institutions, consultants, NGOs, and academic institutions; financial institutions participating in method road testing; and a broader Stakeholder Advisory Group (SAG) which provides input at key milestones in the framework development process.
Here are highlights from the development process:
- September 2018: First EAG meeting. Read a summary of the discussion.
- December 2018: EAG meeting to introduce the draft methods and solicit initial feedback.
- February 2019: EAG meeting to obtain feedback on the road-testing process.
- April 2019: Launch of methods road-testing process. Watch a recording of the webinar and view slides.
- April-September 2019: Gathered feedback from financial institutions and other stakeholders on draft asset class-based methods through road-testing process and an open stakeholder consultation.
- October 2019: Hosted a webinar to share a summary of feedback received from companies participating in the road testing process. Watch a recording of the webinar and view slides. Read a summary of method road-testing feedback (December 2019).
- November 2019: Co-hosted a webinar with Global Compact Network Australia and WWF to share progress on methodologies with financial institutions in Oceania and Asia Pacific. Watch a recording of the webinar and view slides.
- February 2020: Hosted workshops in London and Tokyo to gather feedback from stakeholders on draft target validation criteria. View slides here.
- April 2020: Hosted a webinar to initiate public call for feedback on development of a new temperature scoring draft methodology for companies and investment portfolios. Watch a recording and view slides.
- April-May 2020: Conducted public consultation to gather input from stakeholders on draft target validation criteria and tool development process that will serve as central components of the SBTi’s framework for financial institutions.
- May 2020: Hosted a webinar to share a summary of stakeholder feedback on draft target validation criteria. Watch a recording and view slides.
- May 2020: Participated in a webinar hosted by the Institute of International Finance to share a project overview and update. View recording.
- August 2020: Public consultation on the first draft of the Financial Sector Science Based Targets Guidance took place from August 6-27, 2020.
- July-August 2020: Beta testing of an open-source temperature scoring and portfolio coverage launched.
- August-October 2020: Revised the first draft of the guidance based on feedback received in the survey and other engaged stakeholders; revised the Temperature Rating and Portfolio Coverage tool and tool documentation based on feedback received from beta testers.
- October 2021: The first targets validated by the initiative.
For general questions, please contact:
- Nate Aden, Senior Fellow, World Resources Institute
- Howard Shih, Research Associate, World Resources Institute
For questions about the SBTi Finance Tool for Temperature Scoring & Portfolio Coverage, please contact:
- Donald Linderyd, Sustainable Finance Project Manager, WWF Sweden
Sign up for the SBTi's Financial Institutions Stakeholder Advisory Group to stay up to date with project milestones.
The initiative defines a financial institution as one that engages in investment activities as part of its core functions. These include, but are not limited to, the following:
- Asset management/asset owners
- Retail and commercial banking activities
- Insurance companies (when functioning asset managers)
- Mortgage real estate investment trusts (REITs)
In addition, if at least 5% of a company’s revenue comes from activities such as those described above, they would be considered a financial institution.
The financial sector’s largest impact comes from its investment and lending activities (known as scope 3 emissions) and therefore it is imperative that targets for this sector encompass such activities.
The Pilot Phase closed on February 11 2022.
With the close of the Pilot Phase, financial institutions are now charged for target validation in order to better resource and support the increased demand for validation services.
These changes came into effect on February 11. Prices are re-evaluated on an annual basis. The price for a target validation will be $14,500 for the first submission and all following.
Financial institutions will be integrated into the existing SBTi booking system, but do not need to expect delays in target validation.
Financial institutions will have a slightly revised submission form to complete before target validation that tailor to their business models.
During the pilot phase, SBTi offered preliminary assessment of financial institutions’ scope 1 and 2 targets as an initial target-setting step. After the pilot phase, the SBTi is exclusively focused on full scope 1, 2, and 3 target assessment given the preponderance of scope 3 in financial institutions’ climate impacts.
Browse more sectors
If your sector is not listed here, you can still set a science-based target using our methods and resources. Consult the step-by-step guide to get started.