Net Zero
24 Mar 2025
The SBTi’s Draft Corporate Net-Zero Standard Version 2.0: A New Era for Corporate Decarbonization
6 Min Reading Time
The Science Based Targets initiative (SBTi) has released its Financial Institutions Net Zero (FINZ) Standard—an important framework that could redefine climate accountability in finance.
Beyond requiring financial institutions to set long-term targets across all their activities, the FINZ Standard also introduces rigorous policies such as the immediate end to new fossil fuel project financing and a no-deforestation policy by 2030.
This framework has been released at a critical juncture. As ESG faces backlash related to both mandatory and voluntary commitments, FINZ offers a solid, transparent, and enforceable standard. Setting targets is no longer optional. It’s the foundation of credibility – the bridge between ambition and accountability. The Financial Institutions Net Zero Standard gives financial institutions the tools to lead—not just in climate strategy, but in restoring trust.
The question now is not whether the standard is strong enough, but whether the industry is ready to rise to the challenge.
Financial institutions have a central, enabling role in the global net-zero transition. By aligning their decisions with climate goals, financial institutions can steer capital towards the decarbonization solutions needed throughout the economy. Setting science-based targets is a key step to mitigating exposure to climate-related risks, building resilience, and maintaining competitiveness in a rapidly transforming market, whilst supporting the global net-zero transition.
The SBTi developed the Financial Institutions Net Zero Standard to provide a science-based framework for financial institutions to align their lending, investing, insurance underwriting, and capital market activities with net-zero. The standard presents several innovations compared to the existing Financial Institutions Near-Term Criteria, including a broader coverage of asset classes and financial activities, extended use of more actionable metrics and targets, and imposing policies targeting the most emission-intensive activities, such as financing fossil fuel activities and deforestation.
This new standard went through a comprehensive and iterative consultation process. It is the result of multiple rounds of stakeholder engagement, including public consultations, expert advisory group (EAG) meetings, and pilot testing with financial institutions. The initial 2022 draft was refined throughout 2023-2024 by integrating feedback and technical adjustments, and the final version was published in July 2025. This evolution reflects the growing urgency and complexity of aligning financial portfolios with science-based climate targets.
The following table summarizes the main changes of the Financial Institutions Net Zero (FINZ) Standard compared to the existing Financial Institutions Near-Term Criteria.
| Main Changes | FINZ (July 2025) | SBTi Financial Institutions Near-Term Criteria (May 2024) |
| Target Horizons | Institutions must now set both near-term and net-zero targets. 1. Near-term targets (up to 5 years) The near-term targets must focus on immediate and actionable steps. Financial institutions can choose between: – Portfolio climate-alignment targets (e.g. % of aligned financial activities) – Sector-specific targets (e.g. emissions intensity in steel or power sectors). 2. Long-term targets (by 2050 or sooner) Long-term targets represent the end goal of achieving net-zero emissions from all the companies and clients an individual entity finances, invests in, or insures. Financial institutions must: – Set net-zero portfolio climate-alignment targets that cover 100% of activities in all segments (A–D, see below). – Align at least 95% of financing with net-zero benchmarks by 2050 at the latest. | The near-term criteria focus on near-term targets. Targets must cover a minimum of 5 years and a maximum of 10 years in the future. |
| Boundary Extension | The asset class coverage is broader and includes more financial instruments. Insurance underwriting is now explicitly included . Activities included: commercial insurance and reinsurance for fossil fuel and emissions-intensive sectors, real estate projects, and other sectors. Activities excluded: personal lines (e.g., life, health, pet insurance), statutory lines, and insurance-linked securities are excluded for now. New expectations: Insurers must engage with insured entities to align their business models with net-zero goals and prioritize underwriting for climate-aligned clients. This is a major expansion compared to previous standards. | The near-term criteria cover major financed emissions but on a more limited scope (mainly lending and investing activities) with some asset classes optional (less unified scope). |
| Fossil Fuel Policy | The FINZ includes stricter criteria for fossil fuel exposure and phase-out requirements. Financial institutions must develop and publish a fossil fuel policy that addresses their financial activities in the fossil fuel sector (coal, oil, and gas). They are required to immediately cease new in-scope financial activities related to: – New coal mines or expansions – Unabated coal-fired power plants – New upstream oil and gas projects In addition to these requirements, FINZ gives a mandatory phaseout timeline: – By 2030 for OECD countries – By 2040 globally. This is stricter than previous standards that allowed more flexibility or gradual phaseouts. | Fossil fuel-related targets are included but less prescriptive as there is no explicit immediate ban on new fossil fuel project financing. |
| Real Estate Policy | Financial institutions are recommended to publish a policy that commits to ceasing new financial activities for buildings that are not zero-carbon ready, and increase financial activities dedicated to retrofitting existing buildings. | Real estate policy is covered through sectoral decarbonization targets and portfolio coverage methods for commercial real estate. Explicit real estate policies are not required to be published. |
| No-Deforestation Policy | The FINZ includes more precise recommendations with a firm deadline to align with science-based deforestation targets. Financial institutions must commit to assess and publish their deforestation exposure by no later than 2030. This applies to direct portfolio entities involved in primary deforestation commodities (e.g., beef, palm oil, soy, cocoa, timber, wood fiber). If the exposure is significant, financial institutions must publish an engagement plan to phase out both commodity-driven deforestation and ecosystem conversion within their financial activities by their next target cycle. | No specific, explicit no-deforestation policy requirement. |
| Carbon Offsetting Policy | No clear guidance By the net-zero target year, any remaining emissions from all the companies and clients an individual entity finances, invests in, or insures must be neutralized in accordance with the SBTi Corporate Net-Zero Standard. | The standard focuses on reducing portfolio emissions via setting near-term reductions. |
Financial institutions’ net zero transformation journey entails:
After establishing the relevant organizational boundary, financial institutions identify their in-scope financial activities. A financial activity is considered in-scope if it represents 5% or more of total revenue. This ensures that material exposures are not overlooked.
After selecting a base year that is representative of their business activities, financial institutions are required to perform the following assessments:
The FINZ standard requires financial institutions to develop both policies and targets:
Financial institutions should ensure that all claims are accurate, transparent, verifiable and compatible with the criteria of the FINZ standard.
The Financial Institutions Net Zero Standard is effective from the date of publication (July 2025). A transition period until at least December 2026 will be provided during which both the Financial Institutions Near-Term Criteria and the FINZ will coexist for target validation. During this period, institutions are encouraged to utilize both standards for a comprehensive climate strategy.
Financial institutions aiming to submit targets under the new Financial Institutions Net Zero Standard should follow this timeline:
The Financial Institutions Net Zero Standard framework now requires financial institutions to assess and set targets for five distinct financial activities:
The activities are classified across the four following segments, from A to D:
| Segment A | Segment B | Segment C | Segment D |
| Fossil fuels (coal, oil and gas) | Transport (air, maritime, and land) Industrial (steel, cement) Energy (power generation) Real estate (residential and commercial buildings) Forest, land and agriculture (FLAG) | Other sectors not listed in A or B (e.g. retail, services, technology, healthcare…) | Subset of activities in emissions-intensive sectors and other sectors (e.g. SMEs, residential mortgages, small business loans existing buildings…) |
Near-term targets must cover 100% of activities in segments A, B and C and a minimum of 67% of activities across all four segments (A to D).
The financial risks of climate change are coming into sharper focus as regulators set out expectations for stress testing, climate risk management and transition planning. This introductory factsheet looks the sustainable finance opportunity, net-zero for the finance industry and SE Advisory Services’s services for financial institutions
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