Practical application of the SDA on corporate loans portfolios

Hi there,

Can I please ask a practical question on setting targets using the SDA? If an FI is setting a 2030 target for e.g. a corporate loans power portfolio, the time lag in data availability means the base year used may be 2020 or 2021. This means that there is already a year ‘lost’ between base year and present state. Additionally, a key decarbonisation lever for corporate loans is client engagement to set ambitious targets. This creates an additional lag in terms of those clients developing their targets. E.g. in a very ambitious scenario, an FI may engage clients to set targets by end of 2023, which means there is a 2-3 year lag now between the base year and clients shifting to an SBTi-type pathway.

Inherently, this means that even if the entire portfolio adopts ambitious targets very shortly after the FI sets their target, the 2030 reduction required by the SDA may practically be unachievable because of the lag between base year and target adoption. This is entirely different from corporates, where decarbonisation is driven from within the organisation.

I appreciate targets are at the moment somewhat directional but there is a narrative issue to be addressed here; as even if all clients in a portfolio set SBTs, the FIs own SBT may not be met. A view on how SBTi and FIs are considering this would be greatly appreciated.

Many thanks,

Ana