Transition Pathway Initiative

Methodology

The Transition Pathway assesses companies on two dimensions:

  1. Management Quality: the quality of companies’ management of their greenhouse gas emissions and of risks and opportunities related to the low-carbon transition.
  2. Carbon Performance: how companies’ carbon performance now and in the future might compare to the international targets and national pledges made as part of the Paris Agreement.

Companies’ management quality is assessed against a series of indicators, covering issues such as company policy, emissions reporting and verification, targets, strategic risk assessment and executive remuneration. Based on their performance against these indicators, companies are placed on one of five levels:

  • Level 0 – Unaware of (or not Acknowledging) Climate Change as a Business Issue
  • Level 1 – Acknowledging Climate Change as a Business Issue
  • Level 2 – Building Capacity
  • Level 3 – Integrated into Operational Decision-making
  • Level 4 – Strategic Assessment

Companies’ carbon performance is assessed using the modelling conducted by the International Energy Agency (IEA) for its biennial Energy Technology Perspectives report. This modelling is used to translate emissions targets made at the international level into sectoral benchmarks, against which the performance of individual companies can be compared. This framework is known as the Sectoral Decarbonization Approach. The benchmarks are (a) a 2 degrees scenario, which is consistent with the overall aim of the Paris Agreement to hold “the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels”, and (b) a Paris Pledges scenario, derived by aggregating the emissions reductions pledged by individual countries as part of their Nationally Determined Contributions to the Paris Agreement.

A more detailed account of The Transition Pathway Initiative methodology is provided here:

Download full methodology [PDF]

For guidance on how to use The Transition Pathway Initiative:

How can investors use the Transition Pathway Initiative? [PDF]