Science-based climate targets launched for financial sector
Financial institutions worldwide can now validate their climate goals through the Science Based Targets Initiative (SBTi) after the service was launched today.
This is the first opportunity for banks, investors and insurance companies to align their operations and portfolios with the Paris Agreement through the SBTi.
A total of 55 financial institutions, including Standard Chartered and Eurazeo, have already signed up to the new service, which will help redirect capital to green solutions and technologies.
This comes after the UN predicted that energy systems investments must increase from roughly $1.6trn (£1.2trn) to $3.8trn annually between now and 2050 to limit global warming to 1.5°C above pre-industrial levels.
“Today’s breakthrough means banks and other financial institutions can better understand and act on the link between their lending and investing activities and real-economy emissions,” said Cynthia Cummis, SBTi Steering Committee member.
“The finance sector now can, and must, build the bridge to a net-zero emissions economy and enable system-wide improvements based on climate science.”
Nearly 1,000 companies in 50 sectors from coal and gas to pharmaceuticals, with a cumulative market cap of $15.4trn, have pledged to align their decarbonisation plans with the Paris Agreement through the SBTi.
To qualify for validation, the Scope 1 and 2 portions of financial institutions’ emissions (covering their operations and purchased energy) must be in line with an average annual linear reduction rate of 4.2% for a 1.5°C pathway, and 2.5% for well-below 2°C.
Their Scope 3 targets (covering their investments and lending portfolios) must also meet specific criteria relevant to each asset class.
The first 20 submissions from financial institutions will be assessed free of charge during a pilot phase of the target validation service, which will inform updates to the new framework in April 2021.
“The SBTi’s framework highlights the power of financial institutions to redirect capital to companies contributing to the low-carbon transition, and away from those that contribute to climate change,” Cummis added.
Image credit: iStock
Chris Seekings is a reporter for TRANSFORM