Financed Emissions or Customer Alignment: The FINZ Choice
SBTi's FINZ lets an institution focus on financed emissions or customer net-zero alignment. The two routes need different data and different client conversations.
The Science Based Targets initiative’s Financial Institutions Net-Zero Standard (FINZ) version 1.0, July 2025, offers an institution a choice. Target setting can focus on financed emissions, or it can focus on customer net-zero alignment.
Most commentary treats this as a methodology preference. It is not. The two routes need different data, produce different target structures, and put a different conversation in front of the client relationship manager. It is worth choosing deliberately.
The two routes
Financed emissions
You measure the greenhouse gas emissions attributable to the portfolio, normally to the PCAF methodology, and you set targets to reduce that figure.
The appeal is that it produces a number. Boards understand numbers, and the number is comparable across institutions in principle.
The difficulty is twofold. First, the data. Counterparty emissions information is frequently missing, and PCAF’s data quality scoring is designed to make that visible rather than to hide it, so a first baseline usually looks worse than the sustainability team expected. Second, the number moves for reasons that have nothing to do with decarbonisation. A portfolio can decarbonise on paper by shedding a high-emitting client to a competitor, which changes nothing in the real economy.
Customer net-zero alignment
You measure what proportion of the portfolio consists of counterparties that have credible net-zero plans of their own, and you set targets to increase it.
The appeal is that it is harder to game. Moving a client to another lender does not improve their alignment. It also puts the bank in the position of influencing the real economy rather than optimising a portfolio metric, which is closer to what transition finance is supposed to achieve.
The difficulty is evidencing it. Assessing whether another organisation’s plan is credible, consistently, across a portfolio, is a substantial analytical exercise. It is easier with a concentrated corporate book and considerably harder with a diversified retail and SME one.
How to choose
Three questions usually settle it.
What does the book look like? A concentrated corporate portfolio with a manageable number of significant counterparties suits alignment. A long tail of small exposures suits financed emissions, because you will never assess the tail’s plans individually.
What data do you already hold? If counterparty emissions data is genuinely unavailable for large parts of the portfolio, a financed emissions target will be built on estimates for years. That is workable, and PCAF is designed for it, but the board should know that going in.
What do you want the target to change? A financed emissions target changes what the bank holds. An alignment target changes what the bank’s clients do. Those are different theories of influence, and the honest answer to which one the institution actually wants tends to decide the question.
What does not change either way
You still need a financed emissions baseline. Even on the alignment route, you cannot describe a portfolio’s climate position without measuring it, and disclosure expectations under IFRS S2 and most regulators point that way regardless of the SBTi route chosen.
So the baseline work is not optional under either route, and it remains the schedule driver for the whole programme. The choice affects what you build on top of it.
A caveat
This reflects FINZ version 1.0 as at 28 August 2026. SBTi versions move quickly and the documents do not always state clearly which supersedes which, so confirm the current framing of the choice against the standard before relying on it. If a specific criterion matters to your submission, verify it against the SBTi website directly.
How ESGweise helps
We build PCAF financed emissions baselines and work with banks on the target architecture that sits on top, including the alignment assessment where that is the route chosen. See our ESG strategy and sustainability reporting services, and our banking and financial services practice.
To work through the choice against your own portfolio, talk to us.
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Frequently asked questions
What choice does FINZ offer financial institutions?
The Financial Institutions Net-Zero Standard version 1.0, July 2025, allows an institution to focus its target architecture either on financed emissions or on customer net-zero alignment. The two routes lead to different data requirements, different target structures and different conversations with clients, so the choice is strategic rather than technical.
What is the difference between financed emissions and customer alignment?
Financed emissions measures the greenhouse gas emissions attributable to a portfolio, normally using the PCAF methodology. Customer alignment measures what proportion of the portfolio consists of counterparties with credible net-zero plans of their own. The first is a measurement exercise, the second is an engagement exercise.
Which route is easier?
Neither is easy, and they are hard in different ways. Financed emissions is hard because counterparty data is often missing and PCAF data quality scores expose the gaps. Customer alignment is hard because it requires assessing other organisations' plans consistently and evidencing that assessment. A bank with a concentrated corporate book may find alignment more tractable; one with a diversified retail and SME book usually finds it harder.
Can a bank do both?
A bank can measure financed emissions and engage customers at the same time, and most serious programmes do. The choice under FINZ concerns which one the target architecture is built around. Confirm the current requirements against the standard, because the framing of the choice is specific to the version in force.