Norges Bank Investment Management (NBIM) has dealt a strong warning to the Science Based Targets initiative (SBTi) that it must simplify its net-zero standard for companies, or else firms will look elsewhere or stop formally verifying their decarbonisation processes altogether.
Responding to the consultation launched by the SBTi in March on the initial draft of its revised Corporate Net-Zero Standard, NBIM said: “The consultation presents a timely opportunity to evaluate the current approach, and we urge SBTi to strengthen its position by balancing scientific rigour with practical implementation.”
NBIM, which manages the NOK19.2trn (€1.7trn) Government Pension Fund Global (GPFG), said it believed the corporate climate action organisation could keep its central role by evolving a more inclusive framework that prioritised validating targets, aligned pragmatically with technological and market realities, and presented requirements in clear, concise language.
“We believe that the ultimate measure of success is driving widespread, meaningful action across high-emission sectors – not technical perfectionism,” NBIM’s chief governance and compliance officer Carine Smith Ihenacho and Eivind Fliflet, head of environmental team, active ownership, wrote in the letter dated 16 May.
Success should be measured by the volume of global emissions covered by verified targets, rather than simply how many companies participated, they said.
“If the standard remains overly complex and unrealistic, companies will inevitably seek alternative frameworks or abandon formal verification,” the pair wrote.
NBIM made four key recommendations for standard development in the letter – that SBTi should focus on target verification; that it should require alignment with the Paris Agreement, not 1.5ºC degrees; that it simplify and clarify the framework; and recognise real-world constraints in sector methodologies.
NBIM said it valued SBTi’s role and had encouraged companies for many years to submit their targets for validation by SBTi.
“However, we have, through our company dialogues, observed growing challenges with the implementation and verification of science-based targets that we believe merit consideration as SBTi revises its standards,” wrote Smith Ihenacho and Fliflet.
Last year SBTi caused an uproar when its board announced that it might allow companies to use carbon offsets to help meet their climate goals, but the new draft corporate standard reaffirms that this is not permitted.
Read the digital edition of IPE’s latest magazine
No comments yet