Basic carbon management practices are not enough
The Transition Pathway Initiative (TPI) is a global initiative led by asset owners and supported by asset managers, established in January 2017. Aimed at investors, it assesses companies’ progress on the transition to a low-carbon economy, supporting efforts to address climate change. Each year TPI review the progress made by the world’s highest-emitting public companies on the transition to a low-carbon economy.
Using companies’ publicly disclosed data, TPI assesses the quality of companies’ management of their carbon emissions and of risks and opportunities related to the low-carbon transition. TPI assesses as well how companies’ planned or expected future Carbon Performance compares with international targets and national pledges made as part of the 2015 Paris Agreement on climate change. The companies analysed in this year’s report are collectively worth US$11 trillion, approximately 16% of global market cap.
The report shows the company-by-company assessments and tell investors and companies exactly where they stand.
TPI covers Energy, Transport and Industrial sectors, as well as sectors of consumer goods and services. Focusing on the sectors of the global economy with the highest greenhouse gas emissions, TPI selects the largest public companies, based on market capitalisation. 19 companies of aluminium, 33 of cement, 36 of chemicals and 13 of diversified mining, 23 of paper, 32 of steel and 18 of other industrial companies were measured on carbon performance.
Most companies in the TPI universe now have basic carbon management practices in place, such as a policy commitment to act on climate change and disclosure of operational greenhouse gas emissions, but most companies are still not taking a truly strategic approach to the issue. The average Management Quality score – assessing companies’ climate governance – of the 401 companies in the TPI universe is 2.6, which is slightly over halfway between ‘building capacity on climate change’ (Level 2) and ‘integrating climate change into operational decision-making’ (Level 3). Strategic carbon governance and management practices are found at Level 4.
On Carbon Performance – the measure of how current and future emissions align with the goals of the Paris Agreement –
15% of companies now align with the most ambitious Below 2°C benchmark in 2050,
2% align with 2°C, but
47% do not align with any of the benchmarks and
16% provide insufficient disclosure.
The pattern of alignment in 2030 is similar.
In most sectors, companies are not reducing emissions fast enough to hit their 2030 targets. In no sector are companies reducing emissions fast enough to meet their 2050 targets. Electricity utilities have reduced their emissions the most and are on track to meet their 2030 targets, but even they are not on track to meet their 2050 targets. Oil and gas companies have hardly reduced their emissions intensities, while their targeted intensity reductions are very modest. Diversified mining companies with targets, and aluminium producers, have increased their carbon intensities in recent years.
