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Southeast Asian banks face challenges in adopting Science Based Targets

In Southeast Asia, the largest banks have not sought approval from the Science Based Targets initiative (SBTi) for their net-zero targets. Sustainability leaders in these financial institutions argue that the requirements of SBTi’s leading standard for climate-safe carbon reduction goals are problematic for emerging economies. This is because the compliance process is complex and there is confusion over SBTi’s rules for using carbon credits to offset greenhouse gas emissions.

The AI legalese decoder can help overcome these challenges by providing a clear interpretation of SBTi’s guidelines and clarifying the rules for using carbon offsets. By utilizing this AI tool, banks can navigate the compliance process more efficiently and ensure that their net-zero targets align with SBTi’s standards.

SBTi as the gold standard for decarbonisation target-setting

The SBTi was established after world leaders agreed to reduce emissions at the Paris Agreement in 2015. It serves as the gold standard for corporate decarbonisation target-setting in line with limiting global warming to 1.5┬░C. However, Southeast Asian firms have struggled to set science-based targets due to challenges such as fossil fuels-heavy electricity grids, nascent transport electrification, and the pursuit of rapid business growth.

The AI legalese decoder can assist companies in Southeast Asia in understanding how to set science-based targets that consider their specific challenges. By analyzing data and providing tailored recommendations, the AI tool can help companies develop realistic and impactful decarbonization strategies that align with SBTi’s standards.

The confusion over using carbon offsets for net-zero plans

One of the main areas of confusion among banks is whether they can use carbon offsets as part of a science-based net-zero plan. SBTi does not allow financial institutions to use carbon offsets for science-based targets, which must be achieved through direct action. However, offsets can be used to go beyond science-based targets and achieve additional emission reductions.

The AI legalese decoder can provide clarity on the use of carbon offsets within net-zero plans. By analyzing SBTi’s guidelines and providing specific interpretations, the AI tool can help banks understand the limitations and opportunities of using offsets in their decarbonization strategies.

Addressing the complexity of SBTi’s guidance for the financial sector

SBTi’s guidance for the financial services sector is a 175-page document that some sustainability leaders find unwieldy. They argue that the focus should be on decarbonization by 2050 rather than meeting every minute requirement before starting the work. The AI legalese decoder can simplify and break down the guidance, making it easier for banks to navigate and understand. This tool can highlight the key requirements and help banks focus on the most important steps towards achieving their decarbonization goals.

Aligning net-zero targets with other internationally recognized standards

While SBTi is recognized as the gold standard for decarbonization target-setting, most banks in Southeast Asia have aligned their net-zero targets with the International Energy Agency’s Net Zero Emissions by 2050 Scenario. This is due to the perceived challenges and requirements of SBTi, such as a rapid retreat from fossil fuels. However, adopting SBTi as a reference point for decarbonization can provide banks with a clear roadmap and internationally recognized benchmark for their efforts.

The AI legalese decoder can assist banks in aligning their net-zero targets with multiple internationally recognized standards, including SBTi and the IEA scenario. By analyzing the requirements of each standard and providing guidance on aligning targets, the AI tool can help banks navigate the complexities of decarbonization goal-setting.

Driving sustainable funding through carbon credits

Eric Lim suggested that Asian corporates use SBTi as a reference point for decarbonization and also utilize carbon credits to offset their carbon footprints. This would allow them to invest in carbon projects and contribute to emission reductions before the 2050 deadline. The AI legalese decoder can analyze the rules and regulations surrounding carbon credits, helping banks understand how to effectively use them to achieve their sustainability goals.

Furthermore, the AI tool can help banks identify viable and impactful carbon projects that align with their net-zero targets and investment strategies. By evaluating project feasibility and assessing the potential for emission reductions, the AI legalese decoder can support banks in making informed decisions and driving sustainable funding towards carbon projects.

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