Climate finance groups have joined forces to help investors navigate different frameworks for evaluating corporate transition plans, with an initial mapping exercise said to show areas of commonality from which investors can “take comfort”.
The analysis will feed into work on a tool aimed at helping investors allocate corporates to different categories of transition in their portfolios, supporting effective engagement strategies.
Climate Arc, Institutional Investors Group on Climate Change (IIGCC), and Sustainable Markets Initiative are part of the project with Climate Bonds Initiative. Methodological feedback was provided by the Glasgow Financial Alliance for Net Zero (GFANZ) and representatives from the investment industry.
The project is part of an initiative to help asset managers and asset owners navigate the analysis of their investment portfolios in the transition to net zero and, ultimately, support the progressive decarbonisation of high emitting assets while avoiding greenwashing.
The mapping exercise found consensus on the core principles for setting ’authentic’ targets, devising actionable strategies, and ensuring robust accountability, but that there are some differences in how those principles are interpreted across the frameworks.
According to the project partners, there are five or six categories that can be used to assess which corporates can be credibly included in a transition portfolio.
“Following our analysis, we found there is broad consensus and harmonisation among the frameworks so investors can take comfort that they are all driving towards the same goal regardless of which [transition framework] they choose to adopt,” said Sean Kidney, CEO and founder of Climate Bonds Initiative.
“Opportunities have also been identified to increase harmonisation in how key principles underpinning transition plans are interpreted across the frameworks.”
Dan Gardiner, head of transition research at IIGCC, said the work could support the convergence of transition plan guidance and ultimately help investors navigate the climate transition.
The frameworks considered by the exercise include the Transition Plan Taskforce’s disclosure framework, one of the EU’s European Sustainability Reporting Standards, GFANZ’s expectations for real-economy transition plans, and more.
GFANZ recently name checked dozens of financial institutions that have introduced components of net zero transition plans (NZTP) aligned with the body’s guidance. The TPT is due to release sector guidance for transition plans soon, including for asset owners.
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