Publicly listed companies are failing to implement credible climate transition plans.
For the analysis, the TPI Global Climate Transition Centre, operating at the London School of Economics and Political Science (LSE), assessed over 2,000 companies. The analysis reveals a significant gap between corporate rhetoric and tangible action, particularly concerning capital allocation.
Widespread lack of credible planning:
The report, assessing companies on their management quality and carbon performance, is finding a widespread lack of strategic planning.
The average management quality score for the companies is only 3 out of 5, indicating that they are integrating climate into operational decisions but falling short on long-term strategic planning. A key finding is highlighting a lack of financial commitment to decarbonization.
- 98% of companies are not disclosing plans for shifting capital away from carbon-intensive assets.
- Less than 1% of companies are phasing out capital from carbon-intensive assets. Only 2% of companies are aligning their capital spending with long-term decarbonization goals.
David Russell, the Chair of Transition Pathway Initiative Ltd., emphasized the need for tangible results. He said, “Investors are wanting evidence of transition, not just rhetoric. By connecting management quality scores with emissions data and decarbonization levers, this report provides a clearer view of whether companies are delivering the emissions reductions required to meet their climate targets.”
On a trajectory to exceed emissions budgets:
The report also found that companies are not on track to meet global climate targets. The 554 high-emitting companies assessed for their carbon performance are projected to collectively overshoot their emissions intensity budget.
- Between 2020 and 2050, these companies are set to overshoot the 1.5°C emissions intensity budget by 61%.
- They are also set to overshoot the less ambitious 2°C budget by 13%.
Ali Amin, Policy Fellow, the TPI Centre, underscored the urgency of the situation, noting, “Our analysis shows that companies are making some progress, but the vast majority are remaining off track for the Paris Agreement temperature goals. Companies need to accelerate emissions cuts and strengthen transition planning to give investors the confidence they need to invest.”
The report concludes that sectors like aluminum, oil & gas, and coal mining are the most misaligned, while the auto manufacturing and electricity sectors are seeing faster decarbonization, benefiting from access to mature, commercially viable technologies.
