SBTi releases New FINZ Standard
The Science Based Targets Initiative (SBTi) Financial Institutions New Zero (FINZ) Standard changes the landscape for private equity (PE) and real estate investors. In this article, Myles Tatlock, Associate Director gives an overview of the new standard and what this means for PE and real estate investors.
The FINZ Standard is more favourable for PE than the FINZ Consultation version, but some things have changed.
It’s important PE understand the detail of the FINZ Standard, as it will impact the PE sector regardless of whether PE firms adopt it or not.
FINZ will separate the climate performers from the pretenders. It will help PE attract premium Limited Partners (LPs), and in turn will help LPs price in net zero execution risk during due diligence for their PE investments.
The emphasis for the FINZ Standard is on:
- phasing out fossil fuels
- reducing emissions from heavy emitting sectors
- committing to the long term
- not deforesting
- having more portfolio GHG data
- improving governance around transitioning
- having more investment and operational activities included in the targets
The more the GHG exposure, the quicker asset managers investing (AMIs), such as PE firms and real estate investors, will need to act.
The FINZ Standard places a heightened emphasis on portfolio alignment and even has a separate Implementation List showing interoperability with other initiatives.
Regardless, there is one truth that is not going away, we need to accelerate further GHG reductions, not the easy ones, the tough ones.
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We are now closer to 2050 now than 2000 and that shows in the next level of ambition required.
The good news is the SBTi have listened to the FINZ Consultation feedback and made the FINZ Standard much more useable, especially for PE firms.
Download our FINZ Standard Guide for Asset Managers Investing.
This actionable guide, applicable to both PE firms and real estate investors, summarises the key principles of the standard and crucially, what this means for PE firms and real estate investors. We've also summarised the top three actionable steps you can take right now to ready your portfolio for the changing sustainability landscape.
