Definition of financial institution

Criteria
1

If you are an industrial investment-group that invests both in projects and in companies. For example the company has:

  • 40% ownership in company A
  • 60% ownership in company B
  • 51% ownership in company C
  • And invests in many different energy related projects

Will this company be classified as a financial institution, hence the company needs to follow the Financial Sector Guidance to set a SBT?

Or will the company (as parent company for B&C) need to follow the SBT Guidelines for “ordinary” companies (and follow relevant sector guidance).

Are there any specific criteria that must be met to classify a company as a financial institution (other than the 5% revenue from investments rule)

2

Hi, @Jeanette_Knutsen,

Welcome to the community!
That is currently the main criteria applied to classify as an FI. However, in this situation it is also welcome to get a bit more background information on how they actually invest, company strategy, investment horizons, purpose, exit strategy, etc. And importantly what activities the rest of the company is involved in.
It could potentially be seen as an investment company or a PE firm and would then be an FI. On the other hand, the large stake in company B could indicate that this a non-FI company with minority and majority stakes in several other companies. On balance, from what you explained above, it sound like an FI, but hard to say for sure without an individual assessment.

3

Hello Donald,

Following up on this topic - if a company has financed emissions but is classified as eligible for standard route after the individual assessment, is it correct to assume that the financed emissions would not be included as part of the Scope 3 inventory for determining the Scope 3 emissions target coverage (67% of total Scope 3 emissions).

As there could be cases where if the financed emission portion is included, other Scope 3 categories may not collectively constitute over 67% of total Scope 3 emissions.

4

Financed emissions should be included as part of the Scope 3 inventory. The general approach for real-economy companies to incorporate their financed emissions is proposed in Section 1.2 of the Near-Term Financial Sector SBT Guidance Version 2 draft, which is currently out for public consultation.