SBTi targets should be set for Project Finance only with respect to Electricity generation Project Finance. Other project finance is out of scope. Additionally Project Finance in SBTi is defined as “On-balance sheet loan or equity (private) with known use of proceeds that are designated for a clearly defined activity or set of activities” . Additionally long-term (with duration >12 months) corporate loans of our bank consist in ca. 90% of financing with defined use of proceeds (machinery, capex, expansion, car fleet, buildings, new factory, working capital etc.).
Should we treat all loans with defined use of proceeds as “other Project Finance” and exclude ca 90% of our long-term loans from SBTi targets setting or include such loans in the “Corporate loan” category?
Dear Monika,
In page 84, the FI Guidance defines Project finance as "the financing of a project, such as infrastructure, and public and industrial assets using a limited-resource structure, including debt, equity, and/or mezzanine. "
You should treat long-term Corporate loans with defined use of proceeds as such and not as project finance, and cover these loans as per Table 5.2.
Corporate loans for financing buildings are considered as Corporate loans for Commercial Real Estate. Annex B (page 125) in the FI Guidance explains target setting for this asset class, which is a required activity as per Table 5.2, and FIs must cover 67% of he portfolio by square meters or financed emissions with an SDA target.
Thank you very much for confirming that Project Finance definition on page 14 of the standard does not apply to all loans with known use of proceeds and should be understood as “the financing of a project, such as infrastructure, and public and industrial assets using a limited-resource structure, including debt, equity, and/or mezzanine.” Please further specify whether Project Finance category only relates to large projects and assets (eg. infrastructural, public and industrial) or can it also apply to financing of much smaller, corporate assets (eg. a chicken farm), which are financed under SPV structure in Project Finance formula with limited recourse.