Science Based Targets initiative for Financial Institutions

The SBTi is a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF), which:

• Defines and promotes best practice in emissions reductions and net-zero targets in line with climate science;
• Provides technical assistance and expert resources to companies who set science-based targets in line with the latest climate science;
• Brings together a team of experts to provide companies with independent assessment and validation of targets.

In 2018, the SBTi launched a project to help financial institutions align their lending and investment portfolios with the ambition of the Paris Agreement. As of January 2022, ore than 55 financial institutions have publicly committed to set emissions reduction targets through the Science Based Targets initiative. In 2021, the first financial institutions had their science-based targets validated.

The World Resources Institute (WRI) is the managing SBTi partner for this project and works closely with WWF and CDP through a project core team.

Why it matters 

The goal of the initiative is to make science-based target setting standard practice.

The SBTi FI project intends to raise the ambition of the finance sector by defining and promoting best practice in science-based target setting and providing methods, criteria, guidance and tools to reduce the barriers to adoption and implementation (i.e. actions that lead to atmospheric reductions of GHG concentrations). In 2020, the SBTi published criteria and guidance for FIs to set near-term science-based targets (SBTs) that cover their investment and lending portfolios. FIs are now using the guidance and criteria to develop their SBTs and have them validated by the SBTi.

SBTi FI aims to provide guidance on and foster harmonization of practices around net-zero target setting

In November 2021, SBTi FI presented guiding principles, definitions of net-zero for FIs, metrics for developing targets, and tracking performance, and target formulation considerations such as fossil-fuel financing and use of carbon credits. This paper released for consultation aims to create alignment across the financial community with common language and concepts for net-zero target-setting.

Main areas of work related to climate mainstreaming:

The SBTi Finance project is a sector and asset class-based element in an economy-wide comprehensive transition framework. The SBTi aims to provide a framework for financial institutions to set targets at the asset-class level that are aligned with climate scenarios, and that enable an ex-post evaluation of financial institutions’ contribution to real economy emissions reductions in relation to the Paris Agreement’s mitigation goal. The SBTi Finance framework includes a set of methods and tools that can be used to set targets, criteria that the SBTi will 6 use to assess targets submitted to the initiative, and implementation guidance to support financial institutions in their target development.

The SBTi’s framework will be updated on an annual basis as the understanding of how financial institutions can achieve emissions reductions in the real economy evolves. Because it is not yet clear which specific actions from financial institutions leverage real economy emission reductions most effectively—and which metrics are best for tracking their climate actions—the SBTi’s framework will include annual disclosure requirements and/or recommendations.