This paper is part of C2ES’ Finance and Net Zero Transition: Thematic Briefs series.

A credible net zero transition should include a science-aligned emission reduction target and supporting metrics, decarbonization strategies, capital allocation, governance, aligned policy and advocacy activities, and considerations for nature and a just transition. Elements vary somewhat between frameworks like Glasgow Financial Alliance for Net Zero (GFANZ), the International Sustainability Standards Board (ISSB), the UK Transition Plan Taskforce (TPT) (now incorporated into ISSB), and the European Sustainability Reporting Standards (ESRS), but share broadly consistent guiding themes. For a more detailed comparison of real-economy standards and the state of transition planning see: Corporate Low-Carbon Transition Planning: Best Practices & Recommendations to Support Credible Action.

Achieving Paris alignment for a portfolio requires investors to seek information from companies on their climate targets and strategies. A transition plan is a ready-made encapsulation of all the elements investors need for due diligence of a prospective transition aligned investment. As institutional investors commit to aligning portfolios with the Paris Agreement’s 1.5°C goal, corporate transition plans also serve as essential tools for analyzing strategy. A credible transition plan sets out how a company intends to navigate the transition to a low carbon economy, capturing all relevant disclosures. These plans provide critical insights into how companies intend to navigate the risks and opportunities associated with the transition.

This brief examines how investors can effectively use corporate transition plans to:

• Manage climate-related risks and opportunities
• Guide real-economy asset transitions
• Optimize capital allocation decisions