In July 2025, the Science Based Targets initiative (SBTi) released its updated Financial Institutions Net Zero (FINZ) guidance, marking a significant step forward for the sector and arriving just as early adopters of the previous guidance reach their 5-year target review horizon. The guidance also presents greater alignment with other frameworks, such as the Net Zero Investment Framework (NZIF).

Companies are encouraged to start applying the new guidance as soon as practicable, but a phase-in period has been proposed. Either the FI Near Term (FINT) or the new FINZ guidance may be used for companies looking to set targets until December 2026. SBTi suggests:

SBTi has redefined climate ambition in its FINZ guidance, with more stringent requirements on certain sectors, namely the fossil fuel, transport, industry, energy, and real-estate sectors. The latest guidance introduces the concept of portfolio segmentation – four segments are used to define target-setting requirements and climate ambition:

• Segment A: Fossil fuels (coal, oil, gas).
• Segment B: Transport (air, maritime, land); Industrial (steel, cement); Energy (power generation); Real estate (residential and commercial buildings); Forest, land and agriculture (FLAG).
• Segment C: Other sectors (not listed in segments A or B).
• Segment D: Subset of activities in emissions-intensive sectors and other sectors. This includes private equity, venture capital and private debt in non-fossil fuel sectors with <25% ownership or no board seat, as well as funds of funds.

SBTi’s updated guidance introduces clearer criteria for how financial institutions should treat different types of assets on their journey to net zero. Assets are now categorised as either “in transition” (shifting toward lower-carbon operations), “climate solutions” (assets that directly support decarbonisation, such as renewable energy), or already in a “net zero state”.

For “in transition” assets, the guidance includes an Implementation List of approved benchmarks and third-party methodologies that institutions can use. This expands options for demonstrating portfolio alignment, which previously were limited to either using the ITR methodology or having SBTi-validated targets.

Unlike earlier drafts of the guidance, the final version does not require financial institutions to demonstrate that their portfolio is making progress towards the targets they have set. Institutions must still report their own progress annually and renew targets at the end of each near-term cycle (set at five years). However, there is no requirement to show that portfolio companies are delivering on the targets they have set, as is required in NZIF. In practice, this means financial institutions can meet the standard by ensuring companies set targets, without being responsible for how quickly those companies achieve them.

Climate ambition requirements also depend on the location of assets – financial institutions with assets in developing economies have longer timelines to bring those holdings into alignment, recognising regional differences in transition pace.

As with previous guidance, SBTi mandates that companies make certain over-arching strategic commitments to align with climate goals. These have been expanded with the addition of a commitment to monitor and phase out deforestation and land conversion from the portfolio, as well as to conduct and publish a deforestation assessment by 2030. Requirements for ending new finance to fossil fuel assets and divesting from fossil-fuel related assets remain similar to those outlined in the near-term guidance and are in alignment with coal phase-out by 2030 for OECD countries and 2040 for the rest of the world. The guidance also makes clear that offsets or carbon credits cannot be used to meet near- or long-term decarbonisation targets. Only residual emissions at the point of net zero can be neutralised. Alongside these ambition requirements, SBTi FINZ also raises expectations for climate reporting and transparency.

The new FINZ guidance is currently in a period of transition and will take a while to be adopted more widely in the sector given a phase-in timeline of December 2026. The target-setting tools and associated documentation are not yet published, and there is a generous transition period to prepare key elements of new target-setting requirements, notably portfolio GHG accounting.

While it will be a few months before the first FINZ-aligned targets start to be validated and published, Anthesis is already supporting clients in navigating the new guidance and the implications for their businesses. The practice of setting SBTs enables companies get on track and future-proof growth and is one of the best practices for publicly communicating a company’s commitment to limit the effects of climate change. For more information on their approach and to contact Anthesis, please visit here.

Read Next

Bio Capital will produce food grade CO₂ from food waste as the wider CO₂ market experiences major shortfalls

Posted By: Bio Capital

2nd Oct 2025

Read Article