Financial institutions can now set science-based net-zero targets across lending, investment, and insurance portfolios.
The new Standard expands asset class coverage, addresses high-emissions sectors, and includes deforestation and fossil fuel policies.
Nearly 135 institutions across six continents have already committed to align with the new Standard.
The Science Based Targets initiative (SBTi) has officially launched its Financial Institutions Net-Zero Standard, marking a major milestone in sustainable finance. For the first time, banks, asset managers, private equity firms, and insurers can set science-based targets aligned with net-zero across their financial portfolios.
The Standard provides “clear, actionable science-based guidance” to help financial institutions align their activities—spanning lending, investments, insurance, and capital markets—with limiting global warming and achieving net-zero by 2050.
“Financial Institutions have the ability to play a transformative role in the transition to net-zero,” said Alberto Carrillo Pineda, Chief Technical Officer at the SBTi. “Their influence on the global economy and ability to engage with their portfolios is unparalleled to accelerate the net-zero transition.”
By adopting this Standard, financial institutions can:
Strengthen climate resilience
Meet evolving stakeholder expectations
Manage climate-related risks
Capitalize on emerging decarbonization opportunities
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Crucially, the framework empowers financial players to serve as catalysts for real-world impact by incentivizing portfolio alignment and increasing the share of climate-aligned financial activities.
The Standard includes several innovations:
Expanded asset class coverage for broader adoption
Emissions inventory transparency requirements
Customer net-zero alignment as a valid alternative to direct financed emissions targets
Built environment decarbonization guidance
It also tackles systemic climate risks with focused criteria for emission-intensive sectors:
Deforestation exposure: Financial institutions must assess, disclose, and manage deforestation risks with mandatory engagement plans for high-risk portfolios.
Fossil fuel transition policy: The Standard requires institutions to set clear exit plans from new financial and insurance activities tied to fossil fuels.
The Standard was developed through extensive consultation—including two public feedback rounds, pilot testing by over 30 institutions, and input from experts across NGOs, academia, and industry.
Backed by strong market interest, nearly 135 financial institutions across six continents have already pledged to adopt the new framework.
“With its broad applicability and flexibility, this robust, science-based Standard will help financial institutions drive the net-zero transformation all over the world,” Carrillo Pineda added.
The Standard applies to financial institutions generating 5% or more of their revenue from lending, asset management, private equity, insurance underwriting, or capital markets activities. It introduces a flexible dual-targeting approach: institutions may adopt either portfolio-wide climate-alignment targets or sector-specific emissions reduction targets—allowing organizations to tailor their decarbonization strategies to their operational models while remaining aligned with 1.5°C pathways.
To ensure credibility and accountability, the SBTi has established a structured three-stage validation model—Initial, Renewal, and Net-Zero Target Year—paired with strict governance expectations. Financial institutions must define their organizational and portfolio boundaries, assign oversight at board or executive level, and publicly report progress on an annual basis. The Standard also encourages institutions to cease financing non–zero-carbon-ready buildings and increase investment in retrofitting, while requiring deforestation risk disclosures by 2030 and fossil fuel transition policies with firm phase-out timelines.
Read The Financial Institutions Net-Zero Standard here.
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