Fourth Edition Climate Target Setting Guidelines
The Net Zero Banking Alliance (NZBA) releases its fourth edition of the Climate Target Setting Guidelines, aimed at providing guidance for banks in setting climate targets.
The Net Zero Banking Alliance has issued three versions of climate target setting guidelines in 2021, 2024, and 2025, reflecting the latest progress of climate change and supporting banks’ climate transformation practices.
Related Post: Net Zero Banking Alliance Releases Third Edition of Guidance for Climate Target Setting
Background of Climate Target Setting Guidelines
The fourth edition of the Climate Target Setting Guideline references the Paris Agreement, aiming to limit global warming to 2 degrees Celsius and strive to limit it to 1.5 degrees Celsius. The guideline aims to provide a framework for banks’ credit, investment, and capital market activities, covering Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. Banks play a significant role in the global transition to a net-zero economy, and the guideline focuses on the fifteenth category of Scope 3 greenhouse gas emissions, namely financing emissions.
The climate target setting guidelines recommend that banks establish climate targets for 2030 and 2050 within 18 months of making a net-zero commitment, set intermediate targets every five years, and provide an action plan necessary to achieve these goals. All targets must be approved by the bank’s management, focus on economic impacts, and disclose progress annually. As data quality improves and customer disclosures enhances, the scope of climate targets may continue to expand.
Introduction to Climate Target Setting Guidelines
The Net Zero Banking Alliance offers the following recommendations to banks:
- Set and disclose medium- and long-term net-zero greenhouse gas targets in line with the Paris Agreement: Banks should use medium- and long-term targets to measure and disclose progress in climate action, disclosing information such as the base year, target year, and climate scenarios. The targets should include Scope 1, Scope 2, and Scope 3 emissions, and cover most financing emissions, especially those from carbon-intensive enterprises. The net-zero targets should be subject to limited third-party assurance and utilize an open carbon credit framework.
- Establish emission benchmarks and disclose annually their emissions data from credit, investment, and capital market activities: Banks should adhere to internationally recognized greenhouse gas emission protocols and guidelines, annually measure and disclose carbon emissions and carbon emission intensity. The disclosure should encompass asset categories, measurement methods, and indicators at the portfolio level.
- Set medium- and long-term goals using scientifically based decarbonization scenarios: Banks should utilize reliable and widely accepted scenarios, considering the climate commitments of their respective regions and jurisdictions. Banks may employ multiple different scenarios, explain the key construction elements within these scenarios, and consider the sustainable development goals they involve.
- Regularly review whether the goals are in line with current climate science: Banks should review their climate goals at least once every five years and adjust when necessary to reflect substantial changes. Climate goals need to be approved by management and supervised by governance bodies.
Reference:
Guidance for Climate Target Setting for Banks Version 4
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