Study of 10 companies’ climate planning finds varying levels of ambition and fragmented reporting, but Climate Bonds hopes to drive progress with report
Climate Bonds publishes Scaling Transition Finance, ASEAN: The Transition Plan, analysing the transition plans of ASEAN based entities to assess the current state of transition planning and provide recommendations for next steps. The entities selected were from a range of hard-to-abate sectors, and where possible, were active in the debt markets. Focus is to provide good guidance to entities in this space to guide the content and scope of transition plans for a credibly transitioning company.
The paper was supported by The Oak Foundation.
The report incorporates an analysis of ten company level transition plans, a checklist to achieve the Five Hallmarks of a Credibly Transitioning Company, and guidance for issuers on sustainability-linked bonds (SLBs) as transition finance instruments.
To reach net-zero greenhouse gas (GHG) emissions by 2050, entities operating in most sectors must undergo a major transformation. The key tool that will enable this transformation is a robust transition plan that is science-based, coherent, comprehensive, transparent, and covers all material scopes of emissions and business activities.
Credible transition plans outline climate ambition and the accompanying business transformation that will support it. Good guidance available to steer the content and scope of transition plans.
- Many companies are announcing net zero commitments and efforts are being made to develop transition plans (also called sustainability strategies, climate policies, climate action plans) with key performance indicators (KPIs) and sustainability performance targets (SPTs).
- There is scope for improvement as most of the plans included in the report were fragmented with information contained in multiple locations using different indicators meaning the assessment of the ambition levels and impacts of the plans was difficult
- Targets are not yet consistently underpinned by the credible, comparable, and costed decarbonisation strategies and changes to business practices which are required.
Most entities must transition their activities towards net zero and should start planning for this as soon as possible. Entities operating in some sectors may not have complete clarity on what precisely needs to be done further down the line but should nevertheless begin with what is currently practicable. Climate Bonds new report makes the following recommendations:
- A transition plan should be contained in a single, clearly labelled, easily accessible document
- The plan should be dated and include an indication of how frequently it will be evaluated to incorporate ongoing developments.
- Labelling and terminology should be applied consistently across the transition plan and related documents
- Transition plans should address all Five Hallmarks, and where there are gaps, these should be explained and a clear plan to address these gaps should be included
- Any organisation planning to issue and SLB should follow the guidance given in the report to ensure the maximum credibility and impact.
Sean Kidney, CEO of Climate Bonds Initiative: “Many companies in the ASEAN region are operating in traditional hard-to-abate-sectors and must make the most dramatic changes to their business models if they are to survive. The region is one of the most vulnerable to extreme weather but can take comfort that investors are lining up to pump capital into credible corporate plans on climate transition.”
Source: Climate Bonds Initiative