SDA approach - absolute targets

Which sectors does the SBTi accept absolute targets for, under the SDA (not temperature alignment or portfolio coverage)? We are noting a significant challenge in sourcing activity data and this increases the level of uncertainty for intensity targets. Where an SDA approach is not available yet, is a target following the absolute contraction approach acceptable? Where an SDA approach is available, is an absolute target acceptable – as long as it achieves the equivalent SDA reduction?

Absolute emission targets cannot be set for any sectors, as absolute contraction of financed emissions is not an approved method for financial institutions.
For sectors that do have SDA pathways e.g. power, FIs are expected to set physical intensity for these companies, and not absolute based targets.
If sourcing activity data is a major issue, we are seeing FIs use portfolio coverage as the basis of their target setting and updating this to an SDA based approach as data availability improves

@Eoin as of today, SDA guidance is available for 5 sectors, i.e., apparel & footwear, power, ICT, aviation and FIs. When activity data are not available (for corporate lending not project finance) for any of the above sectors and cannot be obtained, does this mean that one of the alternative options, i.e., portfolio coverage or temperature rating needs to be used? and can you confirm my understanding that the same applies for all other sectors that SDA guidance is not available anyway?

Thanks a lot in advance,

Hi Christina, the guidance you refer to is additional target setting guidance, but this is largely independent of the SDA. SDA pathways already exist for they key high emitting sectors e.g. power, transport, cement, steel, real estate etc. and therefore the SDA can be used for any of these sectors. It is only for sectors without an SDA pathway that would have to use the other methods of portfolio coverage or temperature rating.

Hope this helps to answer your questions - let us know if you need additional clarification