SBTi updates financial institution guidance with optional fossil fuel target criteria

The Science-Based Targets Initiative (SBTi) has updated its guidance for financial institutions’ near-term target setting, including new criteria regarding optional fossil fuel finance targets.

This is the first review of the SBTi Financial Institutions’ Near-Term Criteria. It aims to align the financial sector’s climate ambitions with the organisation’s Corporate Net Zero Standard, including its requirement for operational emissions mitigation to match a 1.5ºC temperature scenario (previously “well below 2ºC”).

In addition, the SBTi has introduced new criteria for financial institutions that wish to or are required by law to set fossil fuel finance targets, which may include disclosure activities or a reduction or phase-out of fossil fuel–related activities.

The new document also clarifies that the exclusion of non-material activities from FI targets “may not exempt any activities related to fossil fuels”.

The new version will come into effect on November 30, 2024. Financial institutions that submit targets before this date can choose to be assessed against the old or the new version of the criteria, but all of them will have to update their targets according to the new version within five years from their validation date.

The SBTi is hosting two webinars on 12 June 2024 to answer questions on the new guidelines.

FIs phasing out fossil fuel finance

Several financial institutions have announced policies to reduce or phase out their financing to fossil fuel projects. Zurich Insurance said in April that it would stop underwriting new oil and gas projects as part of its climate plan, arguing that new exploration and developments “are not required for the transition”.

Barclays, the world’s ninth largest fossil fuel financier, also unveiled several new oil and gas restrictions and exclusions in its new climate transition plan, and announced that it would no longer provide project finance or any other direct financing for oil and gas expansion projects or related infrastructure projects as of February 2024.

But the bank later came under fire for having helped raise US$41 billion for fossil fuel companies in 2023 in the form of sustainability-linked financing.

Overall, the 60 biggest global banks committed US$705 billion to companies conducting business in fossil fuels in 2023, bringing the total since the Paris agreement to US$6.9 trillion.