LSE report finds publicly listed companies lack credible climate transition plans

Florence Jones writes on the Sustainableviews website about new research from the London School of Economics’ TPI Global Climate Transition Centre reveals that almost all of the 2,000 most polluting businesses lack credible transition plans

 

Companies failing on transition planning, stalling on climate reporting

At a glance

• Research published by the London School of Economics’ TPI Global Climate Transition Centre reveals the vast majority of global companies are not making thorough transition plans
• Meanwhile, research by Boston Consulting Group shows companies are also “stalling” on climate reporting
• As the UK looks to make transition planning mandatory, sustainable finance experts say plans can attract more investment

Analysis reveals almost all of the 2,000 most polluting businesses lack credible transition plans

Nearly all of the most polluting companies worldwide are failing to set credible climate transition plans, shows research by the London School of Economics’ TPI Global Climate Transition Centre.

A total of 98 per cent of the world’s 2,000 most polluting, publicly listed companies — from oil and gas majors to cement producers and consumer goods companies — have not disclosed plans to shift capital away from carbon-intensive assets or have not outlined how they will align spending with their long-term decarbonisation goals, shows the report.

Collectively, the companies represent $87tn in market capitalisation and roughly three-quarters of total publicly listed equities worldwide, it says.

The research assessed whether companies have set and implemented net zero targets, as well as how credible these targets are based on their previous emissions reductions and whether their plans rely on proven and commercially available technologies.

Companies across 12 carbon-intensive sectors were assessed, including oil and gas, aviation, steel, cement and electricity utilities.

The researchers gave companies a rating of between one and five to assess the “management quality” of their transition planning. Businesses’ plans were assessed against 23 indicators of climate governance, including board oversight, disclosure, target setting, risk management, lobbying activities and capital allocation.

A majority of companies (55 per cent) were awarded a level three, while just 8.5 per cent were awarded a level five.

While net zero targets have become “common” among companies in the 12 sectors, the report’s assessment of 554 of the businesses’ carbon performance reveals that the majority are not aligned with the Paris Agreement. Only 43 per cent have plans that are aligned with either 1.5C or 2C of warming above pre-industrial levels by 2050, shows the analysis.

This is because companies’ climate targets are either “rarely supported” by convincing transition planning and implementation, would require a drastic change from the company’s previous emissions reduction performance, or rely on unproven technologies.

For example, more than half of the companies (56 per cent) rely on carbon capture and removal technologies as part of their transition plans, which have a low level of readiness compared with widely used technologies such as renewables, says the report.

Climate reporting stalls

Meanwhile, survey data published by the Boston Consulting Group and its spinout decarbonisation software company CO2 AI on Tuesday finds that the number of companies reporting on their emissions is “stalling”.

The survey of 1,924 senior executives across 25 countries and 15 sectors shows that only 7 per cent of companies said they comprehensively report on all of their carbon emissions when asked in 2025, a drop from 9 per cent in 2024 and 10 per cent in 2023. The majority of companies are located in Europe, Asia-Pacific and North America and in the industrial goods, consumer and energy sectors.

Meanwhile, just 13 per cent of the companies surveyed have set emissions targets covering Scope 1, 2 and 3 in 2025, a drop from 16 per cent in 2024 and 19 per cent in 2023. Further, only 12 per cent are “comprehensively measuring climate-related physical and transition risks” in 2025, says the report.

The survey is conducted anonymously and the companies included may change each year, says BCG.

Asia and UK performing above average on reporting

Companies in Japan, China and the UK lead on reporting, target setting and managing climate risk, finds the BCG survey.

On average, 7 per cent of global companies report on Scope 1, 2 and 3 emissions, while in Japan this figure sits at 10 per cent, is 7 per cent in China, and 8 per cent in the UK.

Meanwhile, 11 per cent of Japanese companies have set a target across Scope 1, 2 and 3 emissions in 2025, compared with 21 per cent of companies in China and 18 per cent in the UK. Globally, an average of 13 per cent of companies said they have set targets for all three categories.

UK looks to introduce mandatory transition plans

A consultation by the UK government closed on September 17 that could lead to the introduction of mandatory transition planning in the country. The consultationwas launched under the government’s professional and business services sector plan, which is part of its industrial strategy.

In the consultation, the government proposed introducing sustainability reporting standards in the UK, and welcomed views on mandatory transition planning for large companies and financial institutions.

The Labour party said in its manifesto that transition planning rules would apply to FTSE 100 companies. The final scope of the requirements is yet to be decided.

The government will explore implementing new regulation alongside regulators the Financial Conduct Authority and Financial Reporting Council based on the results of the consultation, it adds.

The consultation also welcomed views on whether UK transition plan requirements should be aligned with those in the EU under the Corporate Sustainability Due Diligence Directive, which may be subject to change under the omnibus simplification process.

UK sustainability leaders are largely supportive of the introduction of mandatory transition planning, show the results of a separate survey by sustainability software company Osapiens. Of the 150 leaders surveyed, 69 per cent said “mandatory reporting is necessary to ensure consistency and transparency”.

Meanwhile, an interim report also published this week by the City of London’s Transition Finance Council calls for wider spread transition planning across the UK economy. The council says transition plans for companies and sectors are essential as they can help financial institutions make decisions on where to direct capital.

Maria Nazarova-Doyle, global head of sustainable investment at IFM Investors, says in response to the TFC report that transition planning guidance published by the council can “improve transparency and accountability, while also lifting the stigma of investing in assets that might not be low carbon today, but instead to support them to become low carbon in the future”.

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