What are science-based targets and the SBTi?
Science-based targets
A carbon reduction target may be said to be “science-based” if it aligns with the goals of the Paris Agreement, namely, to keep global temperature increases below 2°C above pre-industrial levels, whilst pursuing efforts to limit global temperatures to 1.5°C. To achieve this, nations, cities and companies are committing to become net zero by 2050. Net zero is the balance between the carbon emitted into the atmosphere, and the carbon removed from it.
The Science-based Targets Initiative (SBTi)
The Science-based Targets Initiative (SBTi) was established following COP21 and the signing of the Paris Agreement. It recognises the critical role of the private sector in reducing emissions and transitioning to a net zero economy. More than a fifth (21%) of the world’s 2,000 largest public companies have now created net zero targets.[1] But with little regulation, questions have been raised about the integrity and robustness of these targets. This is where the SBTi comes in.
The SBTi provides a framework and standard to help companies and financial institutions develop a robust plan to decarbonise based on their emissions, sector, priorities, and business type. It is open to all business types and sectors and the group provides best practice guidance and validation of a company’s ambitions. It has become the global standard for net zero planning in the private sector.
SBTi has now helped more than 2,869 companies of varying sizes to commit to complete science-based targets, covering a third of global market capitalization (more than $38tn).[2]
The SBTi process follows five steps from making a commitment, to developing an emissions reduction target and plan, submitting the target for validation, communicating the target with stakeholders, and finally reporting progress against the target – see image.
SBTi process
Recognising the challenge of setting targets in the financial sector, SBTi has published specific guidance to help financial institutions set science-based targets that align their investment and lending activities with the Paris Agreement.[3] This includes guidance for the private equity sector as well as a financial institutions tool enabling firms to measure the alignment of companies and investment portfolios with the Paris Agreement.[4]
SBTi has grown rapidly over the last 5 years, in which time it has also received some criticism for a lack of robustness, for example in failing to include emissions from certain sources and thus validating inaccurate targets for some companies, as well as for issues of integrity around the feasibility of progress against targets, and even its accounting methods.
Despite these criticisms, SBTi remains the go-to validator of net zero targets and provider of guidance for companies seeking to plan for and reduce their emissions in line with the Paris Agreement, as shown by the ever-increasing number of commitments being made to the platform.
As it grows, SBTi has vowed to expand its coverage to currently underrepresented parts of the globe, as well as to close the gap it identified between ambition (of targets) and action (in reducing emissions), and scale up ambition on Scope 3 emissions reduction (i.e. from the value chain, and typically the hardest area to tackle).[5]
As such it can be expected to remain an important means for companies and financial institutions to demonstrate their climate commitment and develop a credible plan for net zero into the foreseeable future.
For advice on understanding science-based targets and developing a net zero plan for your organisation or portfolio, please get in touch.
[1] Taking stock: A global assessment of net zero targets
[2] SBTi companies taking action
[3] SBTi for financial institutions