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Science Based Targets Initiative Rethinking Approach to Fossil Fuels, Removing from List of “Companies Taking Action” While Sector-Guidance is Pending

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On March 8, 2022, the Science Based Targets initiative (“SBTi”) announced that it would “no longer accept commitments or validate targets from fossil fuel companies” until it completes development of sector-specific criteria for such targets. Fossil fuel companies that had already submitted commitments to SBTi will also find their commitments removed from the organization’s list of “Companies Taking Action” by March 10. This announcement has significant implications for companies’ assessing the development or implementation of greenhouse gas (“GHG”) emission goals and strategies for addressing climate-focused shareholder proposals.

The SBTi is often regarded as a leader in assessing and certifying corporate climate targets due to the organization’s focus on helping companies to develop targets that it determines are aligned with the emissions reductions necessary to meet the goals of the Paris Agreement, providing a third-party validation of certain corporate climate goals. In an ongoing effort to enhance its methods for assessing and validating science-based targets, SBTi has developed (and continues to develop) sector-specific guidance for the creation of science-based targets. But guidance has yet to be finalized for certain GHG-intensive sectors, including oil and gas. Prior to today, all sectors without sector-specific guidance could still participate in SBTi by committing to set a science-based target, which is the first of five stages that SBTi has established for participant companies. The other stages are: developing a target; submitting it to SBTi for validation; communicating the target; and annually disclosing emissions and progress towards the target. As a result, SBTi’s most recent announcement is an important departure from past practice that may signal rising concerns around developing methodologies to robustly develop and assess targets that may help to alleviate concerns about greenwashing.

Who Does This Affect?

SBTi has provided a breakdown of what the organization’s fossil fuel policy means for companies interested in joining SBTi’s list.

Companies that currently cannot join SBTi include:

1.1. “Companies with any level of direct involvement in exploration, extraction, mining and/or production of oil, natural gas, coal or other fossil fuels, irrespective of percentage revenue generated by these activities.” This effectively bars participation of any company with direct upstream activity. However, it also appears to bar companies at other parts of the fossil fuel value chain (“including . . . refining and marketing pure players, oil products distributors, gas distributors and retailers and traditional oil and gas service companies”), unless they meet a revenue exception discussed below. It is unclear how far this policy may extend, particularly with regards to producers and distributors of lubricants, olefins, and other petrochemicals. SBTi has a separate chemicals sector standard that is also under development, and several petrochemical producers are included on SBTi’s list of companies as part of that sector. Notably, the SBTi policy is specifically discussed under the oil and gas sector; as such, petrochemical companies may still be eligible under the policy; provided their products are meant for purposes other than combustion.

1.2. Subsidiaries of companies under 1.1, until the parent company is eligible to join. This would, therefore, also appear to impact the eligibility of low-carbon, renewables, or other emerging technologies subsidiaries of fossil fuel companies, which may limit the ability for such companies to structure their operations around the SBTi policy.

However, the exclusion of “fossil fuels” does not extend to:

2.1. “Companies that derive less than 50% of revenue from [the] sale, transmission and distribution of fossil fuels, or [from] providing equipment or services to fossil fuel companies,” as defined in the scope of 1.1 above.

2.2. “Companies with less than 5% revenue from fossil fuel assets [examples given include coal and lignite mines] for extraction activities with commercial purposes.” While the scope of this exclusion is unclear, it appears mainly geared at allowing companies with limited revenues from mineral royalties to still join SBTi under their primary sector.

2.3. Electric utilities that mine coal for their own power generation (it should be noted that SBTi has separate, finalized guidance for the power sector).

The immediate implications, however, are perhaps less dire than SBTi’s announcement makes them sound. Only a handful of companies in the oil and gas sector had submitted targets, the coal mining sector does not even appear in the list’s set of sector filters, and power companies using fossil fuels are not included under the policy’s purview (even if they mine the fossil fuels themselves). Nevertheless, the announcement currently takes SBTi off the menu of options available to fossil fuel companies seeking to develop a strong climate strategy.

SBTi’s Pending Oil and Gas Sector Guidance

The exclusion is also not meant to be permanent. SBTi has indicated that its oil and gas sector guidance is still under development, and SBTi has explicitly stated that, after the project progresses further, companies could be considered for reinstatement.

The SBTi sector specific guidance development process occurs over multiple stages, which often include iterative drafting and consultation. A public consultation took place in 2020, and SBTi has announced that the next steps will include a peer review of the target-setting methodology by a panel of independent external experts. After this, some sector guidance has gone through internal review by, e.g., SBTi’s Scientific Advisory Group, or other reviews may be completed in concert with partner organizations. At present, it is unclear when SBTi’s oil and gas sector guidance will be finalized, but SBTi has indicated that they will provide updates on its development later this year.

Broader Implications of the SBTi Announcement?

The more significant impacts of the SBTi’s announcement are likely in the knock-on effects it has for fossil fuel companies as they navigate evolving expectations regarding climate performance. It is notable, for example, that although SBTi has guidance for eight sectors currently in either the scoping or development phase, SBTi has only referenced the developing status of guidance to prevent listing of fossil fuel companies and not companies under the other seven sectors.

While the precise reason for this cannot be known with certainty, fossil fuels have been the subject of much of the increasing attention for climate action by investors, regulators, and other parties. As such, participation in SBTi could have served as a strong signal to assuage these parties that a company is taking significant action.

But there have been some instances of stakeholders being disillusioned with SBTi. For example, in 2021, both financial institutions and environmental activists found the climate transition strategies of certain companies with coal-related operations to be wanting despite having SBTi-approved goals.1 As such, SBTi’s step-back from the fossil fuel sector may be an attempt to position itself with more of a hard-lined approach to fossil fuels, establishing more robust standards before allowing its stamp of approval to be given to companies in the sector.

However, “science-based targets” in general is a phrase that has found increasing purchase, showing up in a swathe of shareholder proposals and corporate commitments. For example, the Partnership for Carbon Accounting Financials — a framework meant to help financial institutions establish sector-based accounts of financed GHG emissions from their portfolios — identifies facilitation of science-based targets as a primary benefit of the partnership.2 SBTi is often, but not always, mentioned alongside these references to science-based targets. And participation in SBTi has even outpaced the expectations of the organization’s founders, spurred on, in many instances, by the increasing pressure companies are receiving from various stakeholders to establish credible climate action plans.3 The oil and gas sector is no exception, with an increasing number of companies looking to establish some form of emissions reduction or net zero target.

SBTi’s step back from including fossil fuel companies is not likely to stem this pressure. Instead, companies and stakeholders alike may look to other frameworks to serve as the guidepost for climate action in the sector. For example, in September 2021, a group of investors representing more than $10 trillion in assets under management announced the Institutional Investors Group on Climate Change Net Zero Standard for Oil and Gas (the “IIGCC Fossil Fuel Standard”), which is being piloted by several large oil and gas companies before a potentially wider adoption by the oil and gas sector. Similarly, members of the Glasgow Financial Alliance for Net Zero (“GFANZ”), which collectively represent approximately $130 trillion in capital, have committed to transitioning their financing, investing, and/or underwriting activities to net zero emissions by 2050. These financial institutions may develop their own internal mechanisms for assessing company transition strategies or (as many of them have on climate-related disclosures) may work together in various consortia to develop the mechanisms they deem most effective in helping them and their portfolio companies meet these commitments.


SBTi’s announcement is not likely to curb stakeholders’ appetites for credible climate targets from companies or companies’ desire to identify third-party organizations that will provide validation on the sufficiency of their commitments. An open question remains how companies may seek to fill the vacuum left by this (temporary) pause from SBTi, and whether or not any alternative that may be developed will satisfy investors. Moreover, calls from investors and other stakeholders for “science-based targets” signals increasing concern that announced goals, and the certification behind them, may be their own form of greenwashing, particularly by buying goodwill now for commitments that don’t have to be fully achieved for, in many instances, almost three decades. SBTi remains an influential organization in the development of climate targets and strategy, and its announcement indicates that the question of credibility is of increasing importance in discussions around climate strategy and goals. This applies to companies generally but warrants particular attention from fossil fuel companies as they engage with stakeholders on climate strategy.

1 See, e.g., Polly Bindman, Why Science-Based Targets are no Substitution for Coal Policies, Cap. Monitor (Sep. 21, 2021), (discussing findings by financial institutions and/or environmental activists for certain companies in the mining and power sectors).

2 See P’ship for Carbon Acct. Fins., Global GHG Accounting & Reporting Standard at 7, 9 (2020),

3 See Pilita Clark, Science Based Targets Climate Campaign Starts to Bear Fruit, Fin. Times (May 26, 2021),

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.