Prospective sectoral GHG benchmarks based on corporate climate mitigation targets

Abstract

As climate change becomes firmly acknowledged as a financial risk, shareholders must consider corporate GHG performance to inform responsible investment decisions. To mitigate future climate risks, prospective benchmarks based on corporate climate mitigation targets are increasingly demanded by shareholders. However, existing benchmarks often lack sufficient sectoral coverage or fail to appropriately harmonize target metrics, scope, and corresponding timeframes. A harmonization process was developed which allows the calculation of sector-level prospective GHG benchmarks in terms of absolute or intensity GHG metrics. This process was applied to harmonize scope 1 and 2 emission targets of 1697 companies reporting in 2018 CDP questionnaires across 13 sectors using 2017 as the common reference year. Results indicate the importance of using a sectoral approach and applying a common reference year to avoid considering reductions occurring before the target was launched due to company choice of target reference year. In 2030, the lowest and highest median reduction rates values are −9% and −36% for fossil fuels and power generation sectors respectively. The findings obtained strongly suggest targeted percentage of reductions should not be the only metric considered when comparing corporate climate mitigation targets amongst peers. Target progress when the target was announced and at a common reference year was found to be an important metric to assess potential greenwashing or poor ambition. In 14% of cases, targets were already achieved when company launched them.