Finance in line for science-based targets

Science-based target validation has been introduced to help financial organisations align their lending and investments with the Paris Agreement, with 55 institutions already committed, including Standard Chartered.

The Science Based Targets initiative (SBTi) has created a framework for the near one thousand companies with a cumulative market cap of $15.4tr that have already pledged to align their decarbonisation plans with the Paris Agreement by adopting science-based greenhouse gas reduction targets (SBTs). But no such target framework has been available for banks or other financial institutions before.

The new target validation service is developed by the SBTi, a collaboration between CDP, the UN Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). It emphasises the vital role of engagement with underlying assets to encourage companies to reduce their emissions and ignite climate action. For example, Liontrust Asset Management has used its leverage as a shareholder to demand that companies set more ambitious targets for reducing their impact on the climate.

To qualify for validation by the SBTi, 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 per cent for a 1.5C pathway and 2.5 per cent for a well-below 2C and their Scope 3 targets (covering their investments and lending portfolios) must meet specific criteria relevant to each asset class.

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