Our industry is engaged in an important dialogue to improve the efficiency and resilience of real assets through transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
The Science Based Targets initiative (SBTi) has recently released its Financial Institutions Net Zero (FINZ) Standard, and it could prove to be the climate line in the sand for private equity and real estate investors.
The FINZ Standard is the SBTi’s first dedicated framework for banks, asset managers, private equity, and other financial institutions setting credible, science-based net zero targets. It requires phasing out fossil fuel exposure, cutting portfolio emissions in line with the 1.5°C climate goal, eliminating deforestation, improving governance, and increasing transparency on financed emissions.
This isn’t another vague pledge. FINZ sets out a clear, measurable path for investors to align with, and it does so by knowing the stakes. SBTi data shows that for financial institutions, the emissions tied to their investments are on average 700 times greater than the emissions from running their own operations. Where capital is allocated will decide whether the climate crisis is slowed or accelerated.
The final FINZ Standard is more workable for private equity than the consultation draft, but it also remains demanding. It calls for phasing out fossil fuels, cutting emissions from heavy industry, ending deforestation, expanding the scope of targets, and strengthening climate governance. The more greenhouse gas exposure a portfolio has, the faster the firm is expected to act.
Some in the industry are already asking, is this realistic? Can investors, whose portfolios are often complex and global, truly meet these targets without sacrificing returns? Others argue the opposite, that failing to act will risk stranded assets, stranded products, brands, and skills, along with regulatory penalties and a loss of investor confidence.
This is more than a moral debate; it’s a question of value. FINZ will give Limited Partners (LPs), the investors funding private equity, a sharper lens to price in climate risk during their due diligence. LPs will increasingly demand that sustainability initiatives prove their worth. The firms executing FINZ well will demonstrate it through stronger returns, better asset value, and reduced risk in a volatile world. Ultimately, those who can show credible, science-based progress will attract the most competitive capital.
“The FINZ Standard is a watershed moment for private equity,” says Myles Tatlock, Associate Director at Verco, and co-author of the Private Equity Sector Science Based Target Guidance. “It’s not just about ticking a box; it’s about the future of capital allocation. The leaders who act now will protect asset value, win investor trust, and stay ahead of regulation. The rest risk being left behind, both in valuation and in reputation.”
For those wondering how to translate ambition into measurable action, we recommend using a decarbonization software platform that goes beyond carbon accounting. These platforms can identify the highest-return actions, then track both financial and emissions performance in real time across entire portfolios. This transforms the FINZ Standard from a daunting requirement into a practical roadmap for profit and reduction.
Also, remember timing matters. We are now closer to 2050 than to the year 2000, and the FINZ Standard reflects that urgency. It isn’t about quick wins. It’s about the hardest, most entrenched emissions in portfolios, tackled at speed and with precision. The next wave of decarbonization is more challenging, with fewer obvious returns at first glance. It demands experts who can unlock value through innovative engineering and financing solutions, delivering implementation that truly stands out.
Whether or not a private equity firm chooses to adopt FINZ, the standard is set to reshape expectations across the market. The question is no longer whether net zero will redefine finance, it is whether the sector can deliver on its promises before time runs out and returns are not met.
This article was written by Myles Tatlock, Associate Director, Private Markets at Verco. Learn more about Verco here.
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