TPI State of Transition Report 2020

The Transition Pathway Initiative (TPI) is a global initiative led by asset owners and supported by asset managers. Aimed at investors, it assesses what the transition to a low-carbon economy looks like for companies in high-impact sectors such as oil and gas, mining, and electricity generation. This enables asset owners and other stakeholders to make informed judgements about how companies with the biggest impact on climate change are adapting their business models. This 2020 State of Transition Report from the Transition Pathway Initiative (TPI) is the latest in a series of annual stocktakes of the progress being made by the world’s biggest and most emissions-intensive public companies on the transition to a low-carbon economy.

The report made a number of conclusions on the state of readiness of businesses, including:

• Management Quality has continued to improve since the last review, but slowly. Nearly 40 per cent of companies are demonstrably unprepared for the transition.
• The vast majority of companies have basic climate governance, emissions metrics and targets in place. However, more advanced carbon management practices are needed. Investors should engage companies to take a more strategic approach to climate change.
• There is often a lack of consistency between companies official positions and the positions of the trade associations they belong to.
• On Carbon Performance, more than 80 per cent of companies remain off track for a 2°C world.
• New net zero announcements imply the use of offsetting, which presents risks.

The document also includes a case study of the shipping sector and its readiness for the transition to a low-carbon economy.

The report finishes by identifying the leading engagement priorities for investors in each of the assessed sectors. The reasoning behind why investors can have an impact on business practices are laid out: first, through initiatives such as Climate Action 100+ (CA100+), investors have developed a model of collective action that drives ambitious change in company practice and performance. Secondly, the report has evidence that it is economically feasible for companies to be aligned with the goals of keeping global temperature rise below 2 or even 1.5°C above pre-industrial levels. Third, investors are making strong commitments to action. The report concludes by reaffirming that investors play an important role in ensuring businesses align with the Paris Agreement goals.