LONDON (Reuters) – A leading arbiter of corporate climate targets said on Tuesday it would tighten the rules for financial institutions seeking its approval to ensure their near-term ambitions were better aligned with the world’s climate goal.
The Science Based Targets initiative (SBTi), a voluntary organisation which assesses corporate climate action plans, said it was broadening the scope of what best-practice looks like and would now ask for more ambition on fossil fuel financing.
Whereas previously financial services firms had to provide a policy on phasing out thermal coal and disclose their annual investment in and financing of fossil fuels, now companies will have to aim higher.
Currently 131 financial institutions including AXA Investment Managers and Aviva have committed to set near-term and net-zero targets at SBTi, its website shows.
Under the tighter rules, firms’ plans must align their Scope 1 and 2 emissions, those from their own operations and energy usage, with efforts to cap global warming at 1.5 degrees Celsius above the pre-industrial average, rather than well below 2 degrees.
Their Scope 3 emissions, including those attached to a bank’s financing activities or asset manager’s investments, should align with a target of well below 2 degrees Celsius from a previous goal of 2 degrees, it said in a statement.
The move follows warnings from climate scientists that global temperature rises must be kept below 1.5 degrees Celsius to avoid the worst impacts of a hotter climate.
From November onwards, companies will need to set emissions targets for activities related to fossil fuel projects and companies, and phase out support for those not on course to align with the new targets.
In addition, companies must bring forward the target year for their Scope 1 and 2 emissions reductions from 5-15 years to 5-10 years.
They will also need to provide more information about their lending and broader financing to the fossil fuel sector to ensure all activities are covered.
SBTi, which has validated 4,204 corporate plans since its founding, is also working on a broader net-zero standard for financial groups that will cover long-term planning, although that is currently in draft form.
(Reporting by Virginia Furness; editing by Simon Jessop and Susan Fenton)
