Why? It can help institutions send a clear message to all internal and external stakeholders on the activities that will no longer be financed by the institution, or those that are seen as needing to “transition” to low-carbon, climate resilient business models.
How? These targets can take different forms, such as deadlines after which institutions will stop investing in – or have fully divested from – specific types of assets. In most cases, these targets are related to reporting regulations in specific countries or developed as part of strategies to manage financial risks related to climate change, or to “align” with climate goals. A growing number of financial institutions now also set targets related to their engagement strategies with clients and counterparts.