SBTi Financial Institutions Net Zero Standard

As global pressure to act on climate change intensifies, the financial sector is emerging as a critical player in driving decarbonization. Financial institutions hold the power to influence emissions through capital allocation, investment strategies, and portfolio management. But to align with climate goals, a structured, science-based approach is essential. That’s where the SBTi Financial Institutions Net-Zero Standard comes in. What Is the Financial Institutions Net-Zero Standard? Developed by the Science Based Targets initiative (SBTi), the Financial Institutions Net-Zero Standard is a comprehensive framework designed to help financial entities align their lending, investing, and portfolios with global net-zero targets. Unlike earlier near-term criteria, this Standard expands its scope across more asset classes, includes clear fossil fuel transition policies, and integrates metrics for deforestation and energy exposure. Who Can Use the Standard? The Standard is primarily intended for financial institutions generating 5% or more of their revenue from lending, asset ownership/investment, asset management, insurance underwriting or capital market activities. This includes public and private institutions, pension funds, and sovereign wealth funds. [caption id="attachment_8997" align="aligncenter" width="1024"] Key steps of the SBTi Net Zero Standard for Financial Institutions[/caption] 1. Make a Net-Zero Commitment Institutions should begin by making a public commitment to reach net-zero by 2050 or earlier. They should define organizational boundaries and identify “in-scope” financial activities (those contributing ≥5% of total revenue). Categorize these activities into four segments: Segment A: Fossil fuels. Segment B: Transport, industrials, energy, real estate, FLAG (Forests, Land, and Agriculture). Segment C: Other sectors. Segment D: Emissions-intensive or uncategorized activities. 2. Conduct a Base-Year Assessment Select a base year (typically the most recent available) and conduct the following assessments:

• GHG emissions inventory (Scopes 1, 2, and portfolio Scope 3).
• Climate alignment of financial activities.
• Exposure ratio: clean energy vs. fossil fuels.
• Deforestation exposure (mandatory by 2030).

This establishes the baseline for setting targets. 3. Develop Policies and Set Targets Support net-zero plans with formal policies and measurable targets. Key Policies Fossil Fuels: Avoid financing new coal, oil, and gas expansion; engage with clients to support transition. Deforestation: Disclose and mitigate deforestation exposure. Real Estate: Prioritize financing zero-carbon-ready buildings and retrofits. Targets Non-Portfolio Targets: Required for Scopes 1 and 2; Scope 3 where applicable. Near-Term Portfolio Targets: Cover Segments and 67% of financial activity; typically set for up to 5 years. Long-Term Portfolio Targets: Cover 100% of financial activity by 2050. Institutions can choose between climate-alignment or sector-specific approaches, or use a combination. 4. Track and Communicate Progress Report progress annually using consistent and transparent metrics. Required disclosures include:

• Gross GHG emissions for segments A, B, and C, as well as methodology, assumptions, data sources and data quality. Separate reporting is required for: - Scopes 1 and 2, and scopes 1, 2 and 3 portfolio-level emissions - Carbon removals, carbon credits and avoided emissions (if relevant) - Fossil fuel-related emissions, and as data quality allows, methane emissions
• Climate-alignment and sector metric assessment
• Clean energy to fossil fuel financial exposure ratio
• Deforestation exposure.

Update targets as needed at the end of each cycle. 5. Make Climate-Related Claims All public claims related to climate targets and progress should be:

• Transparent
• Verifiable
• Aligned with applicable regulations

Claims must be based on disclosed data and reflect actual progress. Why this Standard Matters The Standard provides a voluntary, science-based pathway that can support strategic decision-making. For some institutions, it may help identify climate-related risks across portfolios. For others, it can surface opportunities in clean energy, sustainable finance, and long-term value creation. While implementation can be resource-intensive, the long-term benefits, from risk mitigation to reputation enhancement, make it a worthwhile investment. By adopting this Standard, financial institutions not only demonstrate a credible, verified commitment to climate action, but also enhance their resilience against escalating climate-related risks, meet evolving stakeholder expectations, and position themselves as leaders in shaping a sustainable future. Need Help Aligning Your Financial Strategy with Net-Zero? At Envint, we help businesses across sectors navigate their SBTi Net-Zero journey. Our support includes sector-specific guidance on SBTi criteria, GHG (Scope 1, 2, 3) emissions assessments, science-based target setting, and end-to-end assistance with SBTi validation. This ensures companies set credible targets aligned with global standards for their net-zero goals. Get in touch with us at connect@envintglobal.com to learn how we can support your transition to a net-zero future. Click here to know more about Impact Reporting.

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