· 3 min read
illuminem summarises for you the essential news of the day. Read the full piece on The Wall Street Journal or enjoy below:
🗞️ Driving the news: The Science Based Targets initiative (SBTi) has released a new framework to guide financial institutions—such as banks, asset managers, and insurers—on aligning their portfolios with net-zero emissions by 2050
• The standard mandates a halt to financing fossil fuel expansion and introduces timelines to reduce exposure to deforestation and high-emitting sectors
• This comes as several major institutions scale back or abandon previous net-zero commitments
🔭 The context: SBTi’s announcement follows a wave of withdrawals by U.S. and European financial institutions from voluntary climate alliances, including the Net Zero Banking Alliance (NZBA)
• Citing political pressure and regulatory uncertainty, firms like JPMorgan, BlackRock, and HSBC have either exited or diluted key climate commitments
• Meanwhile, financed emissions—the indirect emissions from lending and investments—remain the largest carbon footprint for most financial entities, posing reputational and systemic risk
🌍 Why it matters for the planet: Financial institutions play a critical role in climate mitigation by influencing capital flows. Without clear standards, many continue to fund fossil fuel expansion and deforestation-linked industries, undermining global efforts to limit warming to 1.5°C. SBTi’s science-based guidance creates a common, enforceable framework to drive decarbonization through the financial system, but its effectiveness hinges on institutional uptake amid rising political resistance.
⏭️ What's next: Institutions seeking SBTi validation must now cease funding fossil fuel expansion and commit to portfolio-level emissions reductions
• ING’s example—ending oil and gas financing by 2040 and coal finance by 2025—illustrates the level of ambition expected
• Financial institutions must also assess and disclose deforestation risks by 2030, with engagement plans required for high-risk exposures
• The coming months will test whether the financial sector will embrace this voluntary standard or continue retreating from climate leadership
💬 One quote: “Financial institutions have the ability to play a transformative role in the transition to net zero … their influence on the global economy is unparalleled,” — Alberto Carrillo Pineda, CTO at SBTi
📈 One stat: SBTi’s new standard requires financial institutions to end general-purpose finance to coal-expanding firms immediately and to oil-and-gas expansion by 2030 at the latest
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