New framework launches to help investors assess the credibility of corporate climate targets

The framework covers oil and gas and electric utilities in the energy sector

Published on Wednesday (9 February), the pathways are based on the International Energy Agency’s (IEA) scenarios used in its report on transitioning to net-zero by 2050. They cover three of the world’s highest-emitting sectors – energy, transport and industrials – with sub-sector-specific decarbonisation goals.

The idea of the pathways is to help investors assess whether corporates in these sectors are delivering the emissions reductions demanded by climate science within a suitable time period. For example, investors in shipping firms, airlines, oil and gas majors and other heavy emitters will be able to check whether their emissions reductions are aligned with a 1.5C temperature pathway or 2C temperature pathway in any given year from now through to 2050. 

Investors will also be able to check whether corporates are moving faster than is required of them by national climate pledges, or whether they are falling foul of even this basic decarbonisation requirement.

Sectors covered by the pathways are electric utilities; oil and gas; automotive; aviation; shipping; aluminium; cement; mining; pulp and paper, and steel. As well as the IEA, the TPI has been supported by the Grantham Institute for Climate Change and the Environment at the London School of Economics (LSE) in developing the pathways.

Research published by the TPI this time last year revealed that only 14% of publicly listed companies in the steel, cement, aluminium, paper and mining sectors are aligning with a 2C temperature pathway. Then, in November 2021, the TPI published an analysis of the temperature pathways of 53 of the world’s largest oil and gas firms, concluding that 48 are not aligning with either Paris Agreement pathway.

This slow progress could undermine the net-zero commitments of investors unless they bolster their sustainability-related plans for engagement and divestment. Most of the world’s largest investors now have net-zero targets – either as a standalone or through collaborative initiatives such as the Glasgow Financial Alliance for Net-Zero (GFANZ). However, there have been repeated calls for new standards to be introduced to help investors assess the credibility of net-zero commitments.  

The Grantham Research Institute on Climate Change’s research lead for the TPI, Simon Dietz, said the Initiative is hoping that the pathways will “catalyse the real economy transition plans that we urgently need to avoid the most catastrophic effects of global warming.”

“ It is now time to turn commitment into action,” he added.

The publication of the pathways comes shortly after Berlin-based organisation the New Climate Institute and non-profit Carbon Market Watch published a report assessing the credibility of corporate net-zero targets. Assessing the commitments of 25 large businesses, the research found that most are not science-based and will leave businesses turning to offsetting to address more than half of their emissions footprint. This paper received widespread coverage in national and international news outlets, adding fuel to the fire of the heated discussions around greenwashing we are seeing at the moment.

Sarah George