Listed companies lack credible climate transition plans

Recent research from the TPI Centre, based at the London School of Economics and Political Science (LSE), has found that listed companies are failing to produce credible climate transition plans[i] with just 2% currently doing so.

The latest  State of the Corporate Transition report found that of the 2,000 publicly listed companies assessed, 98% have not disclosed plans to shift capital away from carbon-intensive assets or to align spending with their long-term decarbonisation goals.

The researchers judged companies based on two distinct categories: Management Quality – centred on governance processes, and Carbon Performance – benchmarking the emissions reduction targets of companies against Paris Agreement goals. The companies analysed collectively represent US$87 trillion in market capitalisation and account for approximately three-quarters of the total publicly listed equities worldwide.

Looking at the Management Quality metric specifically, the researchers found that almost all of the companies assessed displayed ‘a significant gap in transition planning and implementation’. Whilst most companies are integrating climate into operational decision-making, they are falling short on strategic planning. Concerningly, less than 10% of companies meet any of the study’s level 5 indicators - these focus on the quantification of transition plan actions alongside the alignment of capital expenditure with decarbonisation goals. The lowest scoring indicators were ‘phasing out capital away from carbon-intensive assets’ (<1%) and the ‘alignment of capital with long-term decarbonisation goals’ (2%).

Whilst the Management Quality metric was determined using data from TPI Centre’s partner LSEG, Carbon Performance was assessed in-house and covered 554 companies from 12 high-emitting sectors. Within this segment, the researchers found that despite a notable increase in long-term alignment since 2020, the businesses assessed are “collectively set to overshoot their 1.5°C emissions intensity budget by 61% and their 2°C budget by 13% between 2020 and 2050.”

The report found that companies must cut emissions far more rapidly than they have in recent years if they are to align with the Paris Agreement’s goals. Additionally, many organisations are relying on unproven technologies, with stark differences emerging across sectors. Aluminium, oil & gas, and coal mining were found to be the most misaligned sectors, whilst shipping is currently the only sector undershooting its 1.5°C benchmark, driven by two large firms with relatively ambitious net zero targets[ii].

Further, the authors claim that between 2020 and 2023, the average company in auto manufacturing and electricity reduced their emissions intensity at nearly five times the rate of their counterparts in cement and steel. They mention that “autos and electricity benefit from clearer, commercially mature decarbonisation options such as electrification and renewables, which can reduce uncertainty and support competitive positioning.”[iii]

Ali Amin, Policy Fellow, TPI Centre at LSE, said: “At a time of increasing transition headwinds, rigorous and transparent analysis is more critical than ever. Our analysis shows that companies are making some progress, but the vast majority remain 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.”[iv] 

References

[i] 2025-state-of-the-corporate-transition-2025.pdf

[ii] Ibid

[iii] bid

[iv] Ibid

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