Investors face a deadline for phasing out fossil fuel financing, as major oil companies pull their support for the SBTi initiative.
In a significant move to combat climate change, the Science Based Targets initiative (SBTi) has introduced a new financial institutions standard, known as the Financial Institutions Net-Zero (FINZ) Standard. This framework, announced in July 2025, mandates banks, insurers, asset managers, and investors to immediately stop financing fossil fuel expansion projects [1][2][3][4][5].
The new standard sets clear guidelines for what constitutes a credible net-zero plan for financial institutions. It requires an immediate cessation of project financing linked to new fossil fuel developments, an instant end to general-purpose financing of companies expanding coal operations, and a phase-out by 2030 of general-purpose finance for oil and gas companies expanding upstream production. Institutions must also publish public policies on fossil fuel expansion and set science-based portfolio emissions targets aligned with a 1.5°C global warming pathway, aiming for net zero by 2050 [1][4].
The adoption of this standard is voluntary, but it serves as a powerful tool for third-party validation of climate commitments. Financial institutions are now held accountable for the emissions impact of their lending, underwriting, investments, and capital markets activities [1][4].
The new standards, published on the initiative's website yesterday, also outline the key requirements for organisations to receive SBTi endorsement. More than 150 organisations, including Schroders, Amundi, Varma, AkademikerPension, PensionDanmark, Strathclyde Pension Fund, TfL Pension Fund, and Elo Mutual Pension Insurance Company, have sought SBTi approval for their net-zero plans [6].
The updated framework expands asset class coverage and offers guidance on decarbonising the built environment. It aims to improve transparency of emissions inventories and makes clear that financing fossil fuel expansion is fundamentally incompatible with any serious net-zero commitment [1][4].
However, the 2030 deadline for phasing out general-purpose financing for oil and gas expansion may delay urgent action, according to Reclaim Finance. Resources from new oil and gas fields planned for approval between 2026 and 2030 could amount to 200 billion barrels, equivalent to 3.6 times global production in 2023 [8].
The International Energy Agency (IEA) has warned for the past four years that no new oil and gas capacity is needed to meet the decarbonisation targets set out in the Paris Agreement. The standards are seen as a critical step to align financial flows with the goals of the Paris Agreement and limit global warming to 1.5°C [7].
While environmental actors have welcomed the standard, major oil companies have shown resistance to such stringent financing restrictions. They rely on capital to fund new fossil fuel projects and upstream production expansions. Some of the world's largest oil majors, including Shell Plc, Aker BP ASA, and Enbridge Inc, have withdrawn from the expert advisory group at SBTi due to the incompatibility of fossil fuel phase-out with their core business [6].
Jessye Waxman, policy adviser for the Sierra Club's Sustainable Finance campaign, has welcomed the new standards as an important and necessary step forward for the financial sector [9]. The standards represent a shift in global capital markets away from fossil fuels, framed by the SBTi and environmental advocates as a transformative tool in the fight against climate change.
Financial institutions, in adherence to the Financial Institutions Net-Zero (FINZ) Standard, are now mandated to cease financing new fossil fuel developments and phase out general-purpose finance for oil and gas companies expanding upstream production by 2030. Furthermore, these institutions must set science-based portfolio emissions targets that align with a 1.5°C global warming pathway, aiming for net-zero emissions by 2050, as a mandatory step towards combating climate change and aligning their financial practices with the goals of the Paris Agreement.
