“The SBTi is sending a welcome clear message that no financial services should be provided to companies developing coal, oil or gas. Financial institutions just cannot wait until 2030 to do this if we are to avoid a massive carbon lock-in that would destroy any hope of climate mitigation (5)...” explains Paul Schreiber, Sr. Policy Analyst at Reclaim Finance, and member of the SBTi Expert Advisory Group. “In practical terms, this means they must start to phase out financing for oil and gas expansion now.”
Institutions seeking net-zero validation from the Science Based Targets initiative must now take immediate steps to end funding for new coal, oil, and gas projects. This includes direct project finance for thermal coal, upstream oil and gas operations, and liquefied natural gas (LNG) infrastructure—a rapidly growing segment many had previously considered transitional.
The framework goes further, requiring institutions to fully exit corporate-level financing for fossil fuel expansion by 2030. This is a critical provision, considering most fossil fuel-related financial services—estimated at 93%—are not project-based but occur at the corporate level. Institutions will also need clear fossil transition policies that demand nearly all supported fossil fuel companies (95%) show genuine decarbonization progress by 2035.
For OECD countries, coal phaseout plans must be in place by 2030; for the rest of the world, the deadline extends to 2040. These thresholds are designed to align financial portfolios with the pace of decarbonization required to meet global climate targets.
The introduction of the FINZ standard has drawn pushback from within the sector. Some banks argue that setting a 2030 deadline for cutting corporate finance ties is overly ambitious, warning it could disrupt client relationships and reduce their leverage to influence energy firms toward low-carbon pathways. Others raise concerns about operational clarity—particularly around definitions of what counts as a "new" fossil project or how to classify metallurgical coal, which can be diverted for power generation.
Despite these objections, the direction of travel is clear. Continued support for fossil fuel expansion is increasingly at odds with net-zero goals. Independent data suggests oil and gas projects slated for development between 2026 and 2030 could produce emissions equivalent to more than three times the current global output.
For financial institutions, the new standard presents a strategic fork in the road. Choosing to align with SBTi guidance means adopting tighter restrictions—but also offers a credibility boost with investors, regulators, and stakeholders prioritizing sustainability. Early adopters may gain competitive ground in the growing market for sustainable finance, while laggards risk exclusion from climate-aligned capital flows.
