Investors given deadline by SBTi for ending fossil fuel financing, as major oil companies withdraw their backing
The Science Based Targets initiative (SBTi) has issued a new mandatory fossil fuel transition policy, calling on financial institutions to cease financing fossil fuel expansion and phase out such financing by 2030. This policy, released in July 2025, aims to accelerate change in the financial services industry and align strategies with the Paris Agreement's decarbonisation targets.
The new SBTi Financial Institutions Net-Zero (FINZ) Standard requires immediate cessation of project finance linked to fossil fuel expansion, including coal. By 2030, general-purpose financing for companies expanding upstream oil and gas production must end. The standard also demands public fossil fuel transparency policies and science-based targets aligned with a 1.5°C pathway for all financial activities.
While adoption is voluntary, many institutions seek SBTi's climate validation for credibility and investor pressure. However, concerns and questions remain about practical impact and enforcement, especially given the phased timelines. Critics note limitations, such as allowing several years before general-purpose financing for oil and gas must end and less stringent rules on deforestation and transition planning.
Environmental groups acknowledge the standard as a crucial step forward but call for stronger measures and faster phase-outs. Major oil companies and financial institutions face increasing pressure to reprioritise capital flows away from fossil fuels, but cautious or partial acceptance persists, with ongoing debate over the robustness and sufficiency of the timelines and definitions in the SBTi framework.
The SBTi's policy could potentially lead to a significant reduction in new oil and gas projects, as the financial services industry is under increasing pressure to stop supporting new fossil fuel production due to concerns about carbon lock-in and the need to meet decarbonisation targets. However, the SBTi's pause in oil and gas standards work due to the withdrawal of major oil companies could potentially delay the industry's transition towards more sustainable practices.
In conclusion, the SBTi’s new mandatory fossil fuel transition policy is pushing for transparency, accountability, and clear fossil fuel phase-out pathways in the financial services industry. Its full impact will depend on voluntary uptake, enforcement dynamics, and subsequent strengthening of standards. As the world moves towards a low-carbon future, the financial services industry must adapt and play a crucial role in the transition.
References:
- The Guardian, "Science Based Targets Initiative to phase out fossil fuel financing by 2030," link
- Financial Times, "Science Based Targets Initiative unveils net-zero standard for banks," link
- Reuters, "SBTi's new fossil fuel transition policy faces criticism from environmental groups," link
- Reclaim Finance, "New oil and gas fields planned for approval would amount to 200 billion barrels," link
The SBTi's Financial Institutions Net-Zero (FINZ) Standard, launched in July 2025, calls for an immediate halt to project finance for fossil fuel expansion and a phase-out by 2030, setting new standards for environmental-science-based targets and climate-change finance in the business world. Critics, however, question the practical impact and enforcement of the policy's phased timelines and worry about the limited rules on deforestation and transition planning.
