Overturning our economies to achieve net-zero requires solid and steadfast institutions. Governments, yes, always (though seemingly declining in supply). However, in a bid to not tell their voting public to consume or travel less than they are used to, governments are taking a relatively hands off approach.
From the sentiments of COP26, it’s clear the plan to reach net-zero is more to try to shift private global finance than provide hard regulatory rules. Two-fifths of the world's financial assets, $130tn, are under the management of banks, insurers and pension funds that have signed up to 2050 net-zero goals including limiting global warming to 1.5°C. The idea is that by changing the financial system, that the trajectory of every economic sector, from energy to transport, food to clothing, how we live, work and what we consume will decarbonise of their own accord.
It’s a long shot. Especially from a sector that’s short-sightedness was potent enough to nearly collapse the global economy. Yet, if the sector is powerful enough to capitulate the global economy, if incentivised correctly, it is powerful enough to transition the economy to net-zero, so the thinking goes.
Under such thinking, the need for organisations like the Science-Based Targets initiative (SBTi), that act as independent and trusted arbiters on net-zero to companies and investors, is vital. The SBTi is a partnership organisation involving the World Wildlife Foundation, the World Resources Institute, the UN, and CDP. SBTi has taken up the mantle of a judge when it comes to corporate climate targets and its stamp of approval is deemed the gold standard.
SBTi’s role in the transition to net-zero is perhaps even larger than its instigators had originally ambitioned. Ahead of the UN climate summit in November, corporate submissions to SBTi jumped by 150% in October 2021 compared to the same month in 2020. A new service to assess longer-term plans is booked out until 2023, and the group plans to expand to meet the demand.
As demand for the SBTi approved targets has rapidly grown, the organisation has seen some teething pains, and the strength of its governance has been brought into question. In-house validation – which now comes at a costly $9,500 ($1,000 for SMEs) – has raised concerns of conflicts of interest. Most standard-setters use third parties to verify compliance with their rules, they don’t do it themselves. “You can’t be judge and jury” said Ralph Thurm, former chief operating officer at the Global Reporting Initiative.
SBTi has also been criticised for not pushing companies to go further. Announcing a 1.5°C ambition level as de facto for corporate climate targets came three years after the world’s top climate scientists published a report on the importance of the 1.5°C threshold.
Calls have also been made for SBTi to disclose funding sources more transparently and explain how this may affect its independence. Now core funding comes from philanthropy, including the Ikea Foundation and the Bezos Earth Fund, as well as the Laudes Foundation.
As governments turn to the private sector to achieve net-zero, we need SBTi to play the part it has taken up. If weak as an organisation, SBTi could be a cash for targets business. In doing so it would play a similar role to the climate crisis as credit rating agencies did to the financial crisis. As a strong organisation, SBTi can drive net-zero, challenge corporations, and engender investing based on operational action rather than paper pledges. The world needs SBTi to demonstrate the hallmarks of a strong and stable institution; effectiveness, accountability, inclusivity, independence, and integrity.