Companies face more rigorous requirements from the U.N.-backed group whose stamp of approval investors increasingly demand before allocating funds.
From next year, the Science Based Targets initiative will no longer give companies more than 24 months to provide concrete plans to meet public pledges. Those that miss that deadline or drop their SBTi commitments will also remain indefinitely on its database, compared with previously when their names would disappear.
"This will provide consistency in the commitment time-frame and increased transparency and accountability," an SBTi spokesperson said.
The policy changes by SBTi, whose partners include the United Nations Global Compact, coincide with growing evidence that companies are dragging their feet when it comes to making good on their climate pledges. An
That's even as the adoption of global rules for corporate disclosure of climate and sustainability risks draws nearer.
The International Sustainability Standards Board, whose voluntary policies are expected to be made mandatory in most countries,
Under SBTi, companies can make near-term and net zero commitments to cut emissions and have as long as 24 months to present a plan for review. So far, almost 1,900 have verified targets and another 1,558 have made net zero commitments.
But a look at near-term commitments by financial institutions suggests many have been fast to make pledges and slow to follow up with credible pathways. As of Oct. 31, when 55 firms faced an SBTi deadline to submit near-term plans, just six had validated targets, according to the initiative.
That jibes with other findings. Only a quarter of the world's biggest banks have set adequate targets for the oil, gas and power generation industry to which they lend and in which they invest, according to a review by Bloomberg Intelligence.
The UN will weigh in next week when the 2022 climate conference, COP27, gets under way. A UN expert group convened earlier this year to address greenwashing in net-zero pledges will offer proposals to
Demand for SBTi verification has never been greater, with more than 100 new commitments being made each month and a waiting-list for validation that stretches into next year.
Still, the surge of net-zero pledges means mandatory transition plans are needed, along with better oversight, according to Reclaim Finance.
"Civil society groups like ourselves can play this role, but at best only partly given the fire hose of information" around net zero, Paddy McCully, senior analyst for energy transition at Reclaim Finance, said by email. "Statutory bodies to verify and monitor disclosures and produce reliable and comprehensive overviews of corporate and financial institution net zero actions are certainly needed."
Just 11% of 506 companies with sales of at least $1 billion have made a commitment to net zero, according to a fresh report by EY. It found that most companies have made only general pledges to address climate change without setting any deadlines for doing so.
SBTi's new policy will apply as of Jan. 31, though companies that faced deadlines before that date can seek an extension to July 31.
"Our aim is to encourage as many companies as possible to submit targets for validation so that they can decarbonize in line with science," SBTi said. "We need to have as many companies on this journey as possible if we are to have a chance of limiting global temperature rise to below catastrophic levels."
