Net-zero on trial in the U.S.: What it means for African finance and energy

A coalition of twenty-three U.S. state attorneys general has issued a formal warning to the Science Based Targets initiative (SBTi), arguing that its newly launched Financial Institutions Net-Zero (FINZ) Standard could breach competition and consumer protection laws. The case, while rooted in American politics and law, carries wider implications for Africa, where access to international climate finance and the adoption of global sustainability standards are increasingly central to economic planning.

The FINZ Standard, released in July, requires financial institutions to align their lending, insurance, and investment practices with net-zero goals. Among its key requirements are immediate restrictions on financing coal expansion, a halt to new oil and gas expansion financing by 2030, and full portfolio alignment with net-zero emissions by 2050. Supporters argue that the rules offer financial institutions a clear and science-based pathway to support global climate targets. But in the United States, opponents see them as a form of coordinated pressure against fossil fuel industries. Iowa Attorney General Brenna Bird, who spearheaded the letter to SBTi, warned that such measures could damage U.S. agriculture, industry, and food security.

The coalition’s concerns extend beyond competition law. They also question whether companies adopting the FINZ Standard risk misleading consumers with ambitious climate pledges that may not be realistically achievable. In their view, this opens the door to potential greenwashing, where firms claim climate credentials without a credible pathway to reach them. The attorneys general are seeking detailed disclosures from SBTi on its funding, its communications with financial institutions, and the extent to which insurers are applying the standard in their coverage decisions.

For Africa, the dispute raises several pressing questions. Many of the continent’s banks, insurers, and governments look to international frameworks such as SBTi when shaping their own policies and seeking access to sustainable finance. If American legal challenges weaken the credibility or global acceptance of the FINZ Standard, African institutions could face greater uncertainty when courting international investment for renewable energy, infrastructure, and climate resilience projects.

The debate also touches on the delicate balance between climate ambition and development realities. While many African states acknowledge the urgency of transitioning to cleaner energy, several — including Nigeria, Mozambique, and Tanzania — continue to view natural gas as an essential part of their industrialization and electrification strategies. A standard that compels global financiers to exit fossil fuel projects may be perceived on the continent as a threat to economic sovereignty and energy security. This tension has been visible in climate negotiations, where African leaders have consistently argued for recognition of their right to use transitional fuels as they expand access to electricity and lift millions out of poverty.

The U.S. challenge also highlights a legal and political dimension that may resonate in Africa. By framing the FINZ Standard as a form of collusion or boycott, the attorneys general have opened a line of argument that African governments or industry groups could adopt in their own jurisdictions. At the same time, the controversy underlines the need for Africa to strengthen its own sustainable finance frameworks. Institutions such as the African Development Bank have already pushed for climate finance rules that recognize natural gas as a bridge fuel, reflecting a more pragmatic approach that balances decarbonization with growth.

Founded in 2015, the Science Based Targets initiative has become one of the most influential platforms for validating corporate climate targets. Its standards are widely seen as a benchmark for credible climate action, giving investors a way to distinguish between serious commitments and symbolic pledges. Whether the legal pushback in the United States will slow the momentum of SBTi remains to be seen, but the episode is a reminder that the governance of global climate finance is as much about politics and power as it is about science.

The outcome of this dispute will matter for Africa not only because it may affect the flow of international capital, but also because it illustrates the importance of shaping climate transition policies that reflect the continent’s unique challenges. As global debates intensify, African financial institutions and regulators will need to navigate a landscape in which standards are contested, investment is conditional, and the balance between growth and decarbonization remains unresolved.

This article is also published on Africa Sustainability Matters. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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