The Science Based Targets initiative (SBTi) has published a net-zero ‘Foundations’ paper, with the aim of helping banks, asset owners, asset managers and other financial institutions to achieve net-zero by incorporating science-based approaches.
The Foundations paper tackles key issues financial institutions face in the process, including defining net-zero, the use of offsets and fossil fuel phase-out.
SBTi said the paper, titled ‘Foundations for science-based net-zero target setting in the financial sector’, will pave the way for its Net-Zero Standard for Financial Institutions, which is expected to launch in 2023.
The standard will be developed through multi-stakeholder consultations, road-testing of methodologies and a technical review with a Financial Net-Zero Expert Advisory Group.
Dr Luiz Fernando do Amaral, CEO of SBTi, said: “Financial institutions are critical players in driving real-economy emissions reductions through investments and lending activities.
“There are signs the sector is embracing this responsibility. Immediate action is already possible for short-term science-based targets. However, when it comes to net-zero, there is little understanding of what it means for the finance industry. Our paper provides the clarity that has been desperately needed and will enable us to develop a Net-Zero Standard for Financial Institutions that will help net-zero pledges deliver science-based action.”
The paper comes as financial institutions representing $130 trillion in assets under management have committed to reaching net-zero before 2050.
Furthermore, as of April 2022, more than 50 financial institutions are committed to setting net-zero targets, with a further 140 committed to setting near-term targets.
SBTi said Schroders is one of the 19 financial institutions currently with approved science-based targets in line with the Paris Agreement’s target of 1.5°C.
Recently, asset manager Schroders published its engagement blueprint, which sets out new standards and engagement targets for equity and bond fund managers and analysts, as part of an overhaul of its stewardship approach.