Regulatory round-up

The Science Based Targets initiative (SBTi) has published an initial proposal to create net zero standards for financial institutions. The proposal builds on both the SBTi’s 2020 guidance for financial institutions to set near-term, science-based targets for their investment and lending portfolios, which can then be validated by the international body; and on the corporate net zero standards it published at the end of 2021. 

Focus on engagement. SBTi is clear that financial services firms’ net zero targets shouldn’t come simply from divestments and at the expense of financing the transition to a greener economy. Achieving net zero emissions at a global scale requires “real world cuts” though companies’ value chains, rather than a reduction in exposure to those carbon emissions in lending and investment portfolios. It prescribes that financial firms should engage with fossil fuel companies and divest only when those groups are unable or unwilling to transition to a net zero business strategy.