Sierra Club and Public Citizen Support Strengthened Rules for Financial Institutions to Achieve Net-Zero Climate Commitments

October 4, 2024

Sierra Club and Public Citizen Support Strengthened Rules for Financial Institutions to Achieve Net-Zero Climate Commitments

New draft guidance from the Science-Based Targets Initiative (SBTi) would add guardrails for Banks, Insurers, Asset Owners, and Asset Managers so that climate commitments are robust, transparent, measurable and credible

Washington -The Sierra Club and Public Citizen have submitted a joint commentin support of the SBTi's Financial Institutions (FI) Net-Zero Standard (FINZ) Consultation Draft, including their recommendations for strengthening the Standard and closing loopholes that perpetuate greenwashing by banks, insurance companies, and asset managers. SBTi is the preeminent standard-setter for corporations making net-zero commitments, with over 9,000 participating companies. With net-zero commitments on the rise, the SBTi ensures that commitments are grounded in and primarily informed by climate science, ensuring that companies with validated commitments are aligning their operational plans with global climate goals.

The groups lauded SBTi's progress to ensure financial institutions are adopting strong policies to facilitate alignment with the goals of the Paris Agreement and minimize lock-in of high-carbon assets. Notably, the proposed standard would require financial institutions to develop and publish a robust policy covering financial activities with the fossil fuel sector, expanding upon the SBTi Fossil Fuel Finance Position Paperpublished last year. The proposed standard also makes headway on forest, land, and agriculture (FLAG)-driven emissions, which have been slow to be included in emissions protocols. For example, the SBTi would require financial institutions to develop a policy to monitor and phase-out commodity-driven deforestation across its financial activities.

While the proposed standard, as drafted, would represent a significant step forward in ensuring that financial institutions' net-zero commitments are credible and actionable, Sierra Club and Public Citizen called on the SBTi to adopt several important reforms. Chief among these are a call to SBTi to require, and not merely recommend, FIs to issue transition plans - with clear interim targets, benchmarks, and timelines - and to encompass insurance underwriting for fossil fuels as part of their SBTi commitment.

Clara Vondrich, Senior Policy Counsel at Public Citizen said, "Financial institutions are the lifeline of the fossil fuel industry. Without loans or insurance, Big Oil hits a wall. Many banks and insurers have had net-zero commitments for years with no mechanism for tracking progress toward that goal. Transition plans are not a nice-to-have, but an essential requirement to keep companies honest and make a difference at this critical moment in the deepening climate crisis. We give special credit to the SBTi for continuing to stand firm against pressure from special interests, and saying "no" to carbon offsets in company targets or transition plans."

Public Citizen and Sierra Club further urged SBTi to close loopholes by expanding "in-scope" financial transactions to include FI investments in hedge funds, sovereign debt (particularly for infrastructure contracts), public insurance contracts, agriculture insurance for both public and private sectors, as well as advisory services, and proxy advisors. Hedge funds and private equity companies are substantial investors in fossil fuels, increasingly becoming lenders of last resort to failing fossil fuel power plants and locking-in unburnable carbon. A robust net-zero policy must include investments in hedge funds, which are substantial and dangerous: BlackRock had over $76 billion AUM in hedge fundsat the end of 2023, and such funding constitutes approximately 7% and 18%of public pension assets and large endowment assets, respectively,"

The groups also urged SBTi to expand its list of "emissions-intensive activities and sectors" to clarify, for example, that "new financial flows" for coal must include debt refinancing for new expansion and/or extension, and to tighten definitions on oil and gas phase-out to counter FI's justifications for continued financing of new gas-related infrastructure.

Jessye Waxman, Campaign Advisor at Sierra Club said, "To date, financial institution's net-zero commitments, which have encompassed promises of efforts to transition portfolios and encourage portfolio companies to decarbonize, have largely failed to align with either climate science or global goals to finance the transition. The SBTi's proposed standard aims to bridge this gap, establishing a clear benchmark for what constitutes a robust net-zero plan and moving the industry significantly closer to achieving these critical targets."

The full comment from the Sierra Club and Public Citizen is available here.

# # #

The Science Based Targets initiative (SBTi)is a corporate climate action organization that enables companies and financial institutions worldwide to play their part in combating the climate crisis.

Public Citizenis a nonprofit consumer advocacy organization that champions the public interest in the halls of power. We defend democracy, resist corporate power, and fight to ensure that government works for the people - not big corporations. Founded in 1971, we now have 500,000 members and supporters throughout the country.

The Sierra Club is America's largest and most influential grassroots environmental organization, with millions of members and supporters. In addition to protecting every person's right to get outdoors and access the healing power of nature, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action. For more information, visit www.sierraclub.org.

Public link

Please use the above public link if you want to share this noodl on another website.