Banking and finance sector faces new initiative: SBTi introduces Net-Zero Standard to boost climate action
The Science Based Targets Initiative (SBTi) has introduced the Financial Institutions Net-Zero Standard (FINZ), a groundbreaking framework designed to align banks, asset managers, insurers, investors, and other financial entities with net-zero emissions by 2050. This standard, which applies to over 150 financial institutions, aims to transform the finance industry's alignment with global climate goals and steer clean capital flows.
The FINZ Standard establishes clear rules and expectations around portfolio emissions, fossil fuel finance, deforestation risk, and transparent reporting. It addresses a historic gap by providing a scientific, sector-specific pathway for financial institutions to align not only their operational emissions but also their financed emissions—lending, investments, underwriting—directly with net-zero climate goals by 2050 or sooner.
Key ways FINZ influences the transition include:
- Setting a scientific, sector-specific pathway for financial institutions to align their financed emissions with net-zero climate goals.
- Driving transparency and accountability through mandatory policies on fossil fuel divestment, deforestation risk management, and public disclosure of portfolio emissions.
- Empowering institutions to redirect capital flows by incentivizing portfolio alignment with net-zero, encouraging the phasing out of finance to high-emitting sectors and increasing finance for climate-aligned activities.
- Supporting risk management and resilience-building for financial firms as they meet growing stakeholder and regulatory expectations while seizing emerging low-carbon opportunities.
- Providing flexibility by allowing institutions to set targets either on financed emissions or customer net-zero alignment, facilitating tailored approaches consistent with existing risk and investment processes.
The FINZ Standard also targets Scope 3 category 15 emissions, which are tied to clients and invested companies. It offers a clear path for aligning portfolio activities with net-zero emissions by 2050 and requires public targets and interim milestones for institutions using the standard.
By early 2026, SBTi plans to fully roll out the standard under new CEO David Kennedy. Banks and asset managers using the FINZ standard must assess exposure to deforestation and real estate, with those at significant risk required to publish mitigation plans. The SBTi usually doesn't let carbon offsets replace real emissions cuts but does see a small role for carbon removals, especially for options like direct air capture or biochar that store carbon long-term.
The FINZ Standard raises the bar for carbon credit demand and is likely to shape the future of the voluntary carbon credit market. Financial institutions facing stricter rules on financed emissions will seek verified carbon removal solutions to hit their climate targets. Nearly 135 institutions across six continents have committed to align with FINZ, and SBTi has validated the most near-term institution targets to date, with a nearly 50% increase year-on-year.
In conclusion, the FINZ Standard offers a rigorous, science-based roadmap that can accelerate the sector’s transition towards a net-zero economy by 2050, fostering credible target setting, increased transparency, and a shift in capital allocation aligned with sustainable climate goals.
- The Financial Institutions Net-Zero Standard (FINZ) sets a scientific, sector-specific pathway for financial institutions to align their financed emissions with net-zero climate goals.
- The FINZ Standard requires financial institutions to establish policies on fossil fuel divestment, deforestation risk management, and public disclosure of portfolio emissions.
- Financial institutions using the FINZ standard are incentivized to redirect capital flows towards climate-aligned activities while phasing out finance to high-emitting sectors.
- The FINZ Standard provides flexibility for institutions to set targets either on financed emissions or customer net-zero alignment, based on their existing risk and investment processes.
- The FINZ Standard targets Scope 3 category 15 emissions, tied to clients and invested companies, and requires public targets and interim milestones for institutions using the standard.
