Investor guidance launched to help assess corporate climate targets

A new framework has been launched by the Transition Pathway Initiative (TPI) to help investors assess corporate climate targets in 10 key high-emitting sectors across energy, transport and industrials.

Backed by investors with over $40trn (£29.5trn) of assets under management or advisement, TPI said that its sectoral decarbonisation pathways provide the “definitive framework” for determining whether companies are on track to transition to net zero by 2050.

The pathway for aviation, for example, states that an individual company's emissions intensity must be below 616 tonnes of CO2/RTK (revenue tonne kilometres) by 2030 to align with limiting global warming to 1.5°C above pre-industrial levels.

This level of granular detail allows investors to judge climate targets accurately and hold companies to account as their real-world emissions are reported year-on-year.

The framework is based on the International Energy Agency’s (IEA) scenarios for transitioning to net zero by 2050, and the underlying methodologies are publicly available to all.

“TPI’s sectoral decarbonisation pathways meet the demand from all stakeholders – investors, companies, civil society organisations – for a credible, rigorous framework for assessing corporate climate change performance,” said Adam Matthew, TPI chair.

“They are recognised by investors as the authoritative translation of the IEA’s scenarios into credible performance benchmarks for industry sectors and for individual companies.”

Electricity, oil and gas, aluminium, cement, diversified mining, paper, steel, automotive, aviation, and shipping are the sectors covered within the new framework.

Sector-specific methodologies are based on a sectoral decarbonisation approach, allocating an absolute, economy-wide emissions budget to each sector.

TPI benchmarks cover the majority of lifecycle emissions in each sector, and extend to 2050, allowing investors to see a company’s transition pathway in the short, medium, and long term.

Matthew added: “In a world where we are faced with multiple interpretations of what the low-carbon transition should look like, it is imperative that we as investors make decisions based on credible, rigorous analysis that is explicitly focused on the goal of net zero and that reflects the economic, technical and societal realities of the low-carbon transition.

“The TPI sectoral decarbonisation strategies provide that analysis.”