CIFFWP4PolicyBriefTransitionfinanceforemergingeconomiesPolicyprioritiesfortheG20JudithTysonandPrashantVazeJuly

2023Keypolicy

recommendationsFinancetosupportinvestmentsto

reducegreenhousegas(GHG)emissionsfrom

hard-to-abatesectors,alsoreferredto

astransitionfinance,needs

tobeexpanded.Thiswillrequire:?

Mandatory

climate-relateddisclosuresandcapitaladequacyframeworks

alignedto

major

exportmarkets’regulatoryrequirements,withweightings

thatfavourcredibleandambitious

transitionplanning.?

Carbonpricingto

aligntransitioningindustries’economicandenvironmentalperformance

incentives

whileprotectingindustryfromhigh-carbonsubstitutesproducedoutsidejurisdictionsand

permitting

importsfromjurisdictionswitheffectivecarbonpricingpolicies.?

Strengthenedsupply-sidepublicpolicy

includingtighterregulationsto

obligenewtechnologyuptake,

nationaldecarbonisingvisions,innovation

subsidies

andprocurementstandards,streamlinedlegal

andlicensingprocedures,andtransitionprojectpipelines.?

Greateruseofpublicexpenditureincludingblendedfinance,leveraginggovernmentsubsidies,issuanceofpublictransitionbonds,publictechnology

developmentandtransfer

andcapacity-buildingforfinanceprofessionals.?

Increasedpolicylending

suchas

mandatorysectortargets,highersectoralandborrowerlimitsandcoordinatednationalpolicyforhard-to-abatesectors.CIFFWP4PolicyBrief:TransitionfinanceforemergingeconomiesReaders

areencouragedto

reproducematerialfortheirownpublications,aslongas

they

arenotbeingsoldcommercially.ODIrequests

dueacknowledgementandacopyofthe

publication.Foronlineuse,

weask

readers

tolinktotheoriginalresource

on

theODIwebsite.Theviewspresentedinthispaperarethoseof

theauthor(s)anddonot

necessarilyrepresenttheviewsof

ODIor

ourpartners.ThisworkislicensedunderCCBY-NC-ND4.0.Howtocite:Tyson,J.

andVaze,P.

(2023)Transitionfinanceforemergingeconomies:policyprioritiesfor

the

G20.PolicyBrief.London:ODI(/en/publications/transition-finance-for-emerging-economies/)2CIFFWP4PolicyBrief:TransitionfinanceforemergingeconomiesContents12Introduction688Supportingprivatetransitionfinance2.12.2riskylendingThelandscapeforprivatetransitionfinanceAdaptingbankregulatoryframeworkstodiscourageclimate91010111112141515161717182.32.4DevelopingspecialistinstrumentsandfundsPolicylending34Transitiontaxonomiesandstandards3.1TransitiontaxonomiesandgreentaxonomiesInternationaltaxonomies3.23.3VoluntarystandardsettinganddisclosureCreatinganenablingpolicyenvironment4.1Supply-sidepublicpolicies4.24.34.44.5MDBandDFIsupportFundingresearchanddevelopmentDemand-sidepublicpolicyinterventionsCross-cuttingpolicyinterventions3CIFFWP4PolicyBrief:TransitionfinanceforemergingeconomiesAcknowledgementsWewouldliketo

thank

SarahColenbranderandLorenaGonzalez

forsupervisionandhelpful

commentsontheoutlineandanearlierversionof

this

draft.Weare

gratefulto

The

Children’sInvestmentFundFoundationfortheirfinancialsupportto‘UnlockingfinanceforIndia’stransitionto

aresilient,Paris-aligned

economy’.Theusualdisclaimersapply.AbouttheauthorsJudithTysonJudithTysonisaspecialistinfinancefordevelopment,includingfinancial

marketdevelopment,privateinvestmentand

climatefinance.Herresearchinterestsinclude

greenbonds,privateclimatefinanceandfinancial

development.Prashant

VazePrashantVazeisanenvironmentaleconomistandclimatefinancespecialist.Hehas

heldpositionsinthe

UKcivilservice,environmentalNGOs,

apensions

firm,andagreenfinancethinktank.He

hasworkedinHongKong

andiscurrentlybasedinIndia.AcronymsAfDBADBAfricanDevelopmentBankAsianDevelopmentBankASEANCA100+CBIAssociationof

SoutheastAsian

NationsClimateAction100plusClimateBondsInitiativeCDPCarbonDisclosure

ProjectEMEmergingmarketESGEU-ETSG20Economic,socialandgovernanceEUEmissionsTradingSystemGroupof20GHGMDBMETINGFSGreenhousegasMultilateraldevelopment

bankMinistryofEconomy,Trade

andIndustry(Japan)(Centralbanksandsupervisors)

NetworkforGreeningtheFinancial

SystemOrganisationforEconomicCo-operationandDevelopmentOECDOJKOtoritasJasaKeuangan(Indonesianfinancialregulator)SBTiScienceBased

TargetInitiativeSustainable

FinanceActionCouncil

(Canada)Sustainable

FinanceWorkingGroupSustainabilitylinked

bond/loanTaskforceonClimate-RelatedFinancialDisclosuresSFACSFWGSLB/LTCFD4CIFFWP4PolicyBrief:TransitionfinanceforemergingeconomiesTPITransitionPathwaysInitiativeUS-ICEFUnitedStates-India

CleanEnergy

Facility5CIFFWP4PolicyBrief:Transitionfinanceforemergingeconomies1

IntroductionAnunresolved

itemonthe

climateagenda

is

acceleratingthetransitionin

high-emission,hard-to-abatesectorssuchascement,steel,

plastics,trucking,shippingandaviation.

Togethertheserepresent30%of

energy-relatedgreenhousegas(GHG)emissions.Theyarealsoessentialforeconomicdevelopment

inanet-zeroworld.Technologicalinnovation,financialsupportandanenablingpolicyenvironmentareneededtotransitionthemtolow-orzero-GHGemissions(IPCC,2023;EnergyTransitionsCommission,2023).Substantialbanklending

isavailabletothesesectors–includinginmajor

emergingmarkets

–butitisnotappliedtotransition1investments.Internationalprivatefinanceforemergingeconomies

islimitedbecauseofgeneralriskaversionand

disincentives

toinvestment

inhard-to-abatesectors.Thisadds

to

the

challenges

foremergingeconomies,includingthattheirhard-to-abateindustrialsectors

constitute

alargershareof

theireconomy

with

proportionatelylarger

fossilfuelproductionand2emission-intensive

industries,suchas

mining,agriculture

andheavyindustry(Ahman,2020).UndertheIndonesianPresidencythe

G20

highlightedtheneed

forprivate

transitionfinance

foremergingeconomies

andestablishedtheG20

TransitionFinanceFramework.Thisdocument

settheagendathroughfive‘pillars’to

mobilisemoresustainablefinance(G20FMCB,2022;G20

SFWG,2023).Thesefivepillarsare:1)Identifyingtransitionalactivitiesandinvestments2)Reportinginformationon

transitionactivitiesandinvestments3)Developingtransition-relatedfinanceinstruments4)Designingpolicymeasures5)Assessingandmitigatingnegativesocialandeconomicimpacts

of

transitionactivitiesandinvestments.1Definedas95emergingmarketandmiddle-incomeeconomies(MICs)./external/datamapper/datasets/FM2By

contrast,

in

low-income

countries

(LICs)

there

is

a

lack

of

a

substantive

existing

private

sector

thatwill

require

transitioning,

although

‘pure’

green

finance

and

development

finance

will

continue

to

be

critical.6CIFFWP4PolicyBrief:TransitionfinanceforemergingeconomiesThispaperlooks

atwhatmoretheG20

can

doto

unlock

transitionfinancefor

emergingeconomies,withafocus

onPillars1,

2,

3and

4ofthis

framework.Pillar5

isacross-cuttingrecommendationrunningthroughtheotherfour.

Section2discussesthelandscapefor

privatefinancefortransitionandhowcentralbanksandgovernmentscandirectmoreprivatefinanceintotransitioninvestments,includingthroughadaptivecapitaladequacyframeworks,encouraginginnovativefinancialinstrumentsandusingpolicylending.Section3discussesthe

currentstateof

andoptimalpathforsustainablefinance

taxonomiesandclimate-relatedriskdisclosurestoensurethatinvestorssupply

transitionfinance,includingtheneedforagreeddefinitions

of

whatisincludedandexcludedand

strongergovernancethroughclearperformancemetrics.Section4

looksat

furtherstepstocreatean

enablingenvironment

fortransitionfinance.Thisincludespoliciesto

incentiviseinvestmentinlow-GHG-emittingtechnologiesinhard-to-abatesectors,includingcarbontaxes,

andmeasures

toincreaseinvestordemandthrougheasingassetdiscovery.7CIFFWP4PolicyBrief:Transitionfinanceforemergingeconomies2

SupportingprivatetransitionfinanceHard-to-abatesectorssuchas

ironand

steel,cementandpetrochemicalsare

highlycapitalintensive,

operated

by

large,listedcorporationsand

tradein

international

markets.

Thesesectorsalready

access

privatefinance.Butthisfinance

needs

tobechannelledintopro-transitioninvestments.Inemergingmarketsmorefinanceneeds

tocomeviacapitalmarkets,

particularlyfrominternationalinstitutionalinvestors.2.1

Thelandscapeforprivatetransition

finance3Themajorityof

financetohard-to-abatesectorsis

banklending,estimatedat

$20

trillionglobally.Ofthis,approximately

15%went

toemergingeconomies,excludingChina.Thislevelof

creditissubstantive,

and

it

iswell-diversifiedacrosssectors.

But,while4availabledatadoesnotclearlyquantify

itsapplication,itislikely

onlyaminorityhas

beenappliedto

pro-transitioninvestments.Similarly,whilegreenandsustainability-linkedbonds

onlyasbeenissuedastransition5Between2016and2022,approximately$250billion

was

privatelyinvestedgloballyinnewclimatetechnologies,with80%of

thiscomingfrom

private

venturecapital(BostonConsultingGroup,

2021).Themajorityof

thisisin

advancedeconomies

and

morethan90%wentto

energy.Bycontrast,technologies

relevantto

hard-to-abatesectorsreceivedonly3%ofthisfinanceandtheamount

thatwenttoemergingeconomieswasnegligible.Increasingtheamount

offinanceanddirecting

moreof

itintopro-transitioninvestmentsandR&Dwillrequireaddressingfundamentalissuesof

weak

privateinvestorriskappetite

foremergingmarkets63Sources

include

the

Bank

for

International

Settlements

statistical

database,

Climate

Bond

Initiative

and

annualreportsofleading

emergingmarket

and

internationalbanks.4For

example,

in

India

40%

of

2022

total

bank

credit

(excluding

personal

loans)

is

to

industry

including

construction(9%),metals

(4%)andtransportand

storage(5%)(Ghoshet

al.,2022;RBI,2022).5Although

it

is

much

more

clearly

‘ring-fenced’

for

pro-transition

investments

because

of

the

taxonomy

andgovernancestandardswhich

accompanythesebonds.6Reflecting

this,

since

2007

sovereign

emerging

market

credit

ratings

havesuffered

a

long-term

decline.

Between2008

and

2021,

Standard

andPoor’saverage

creditratingfor

emerging

marketsfell

from

BB+

toBB-.

By2021,

outof

the

54

emerging

markets

defined

by

S&P,

only

18

had

‘investment

grade’

ratings

and

ratings

for

31

were

verypoor(Bor

CC).8CIFFWP4PolicyBrief:Transitionfinanceforemergingeconomiesandthe

needforstrongerincentivesforbank

lendingto

pro-transitioninvestments.Achievingthisis

being

mademore

difficult

bypossiblefuture

financialsectorregulation.This

might‘pricein’climaterisksforcarbon-intensivefirms–makingfinance

scarcerandmorecostly

forhard-to-abatesectors(Erenet

al.,2020).Thissectiondiscusseshowadjusted

regulatoryframeworks,specialistinstrumentsandpolicydirectedfinance

couldassist.InSection4,

thepotentialroleofMDBsandDFIsisdiscussed.2.2

Adaptingbankregulatoryframeworks

todiscourageclimate-riskylendingLedbytheNetworkfor

GreeningtheFinancialSystem(NGFS),climate-relatedriskstoregulated

institutionsand

tofinancialstabilityarebeingassessed.Newnationalregulatory

frameworksareemergingfocusedonriskmodels,

disclosures

and

taxonomies(NGFS,2023;ESRB,2023).Therehasbeendiscussion

on

incorporating

climaterisksintoregulatorycapitalframeworks.Thiswouldleadtohigherriskweightsforhigher-emission

sectorsandcountries

orregionsmoreexposedtoclimaterisks–whichis

tosay,themajorityof

emergingeconomiesandhard-to-abatesectors–raisingtheircostofcredit.Anyregulatoryreforms

needto

tread

afineline

betweendiscouraging

‘business

asusual’investments

incarbon-intensiveequipmentandincreasingthecostoftransition

financebeingappliedtoreducehard-to-abate

firms’emissions.Capitaladequacyrequirementsmustthereforediscriminate

betweenpotentialstrandedassetsand

transitional

assetsenroutetodecarbonisation

(Tandon,2021;Menon,2022;

ESRB,2023).Adjustingcapitaladequacystandardsto

reflectexpected,ratherthancurrent,transitionrisksforhard-to-abatesectorswouldbeoneapproachto

directlendingaway

frominvestmentsthatexacerbateclimate

risk.To

besuccessfulandavoid‘greenwashing’,suchadjustmentsneedto

beaccompaniedby

strongaccountability

andtransparencystandards

requiringcompanies

toset

‘credible’

plansandtheirprogressinexecutingthem(NGFS,2023).Similarframeworksareneededincapital

markets.In

2022,theInternationalCapitalMarketAuthorityandtheClimateBondInitiativeseparatelyissuedguidanceonthe

use-of-proceeds

and

expectationsfortransitionplans.The

CBIis

also

developingsector-specificstandardsforchemicals,cement

andsteel(ICMA,2022;CBI,2022a).Therehasbeen

criticismthatthresholdshavebeenset

toolowtobeeffective(HaqandDoumbia,2022).

Moreworkisneeded.9CIFFWP4PolicyBrief:TransitionfinanceforemergingeconomiesTransitionfinancecouldalsobepromotedviabanks

emissiontargetsanddisclosuresprocessesto

unlock

‘credit’forfuture

emissionsreductions.Thiswouldmeanthatbanksare

notdisincentivisedfromavoidingtransitionfinanceentirelyjusttomeettheirownGHGemissions

targets.2.3

Developing

specialistinstruments

and

fundsTransition

bondsissuance

incapital

markets

and,

globally,reached$7billionasatDecember2021.Mosthavebeenbysovereigngovernments,MDBs

and

DFIs.Better-ratedemergingmarketsovereignscouldalsoconsiderissuingtransitionbonds.Bonds

with

specialistESGfeatureswouldalsobe

positive.Forexample,impactandgreeninvestors

mighthaveappetiteespeciallywherethebondiscombinedwithsocial

andpovertyalleviationimpact

(IFC,2023).Itwillalsobe

importantto

develop

hedginginstrumentstoenable

investorstomanageriskseffectivelyat

aportfoliolevel,includingderivativesandinsurance.2.4

PolicylendingSomegovernmentsand

centralbankshavemandatesto

provideordirectconcessionalfinancingtoprioritysectors.Forexample,in

Indiabanks

aresetminimumlendinglevelsto

prioritysectors

(Vazeet

al.,2022),and

inEastAsia

governments

partneredwithbanks

as

part

ofindustrialstrategypartnershipswith

localindustrialconglomerates(forexample,Chang,2002)

to

increasethesupplyorreducethe

costofcredit

forspecificsectors.Similar

policylendingmandatescouldbeissuedto

transitionfinancing,particularlyin

countrieswheresuchpolicylendingisalreadyestablished,orlimits

couldbeputonnon-transitioninghard-to-abateactivities.10CIFFWP4PolicyBrief:Transitionfinanceforemergingeconomies3

TransitiontaxonomiesandstandardsTheexpansionofinternationaltransitionfinancefrom

advancedtoemergingmarketeconomiesrequiresanagreedsetof

definitions(ideallysharedacrossjurisdictions)

of

qualifyingassetsand

arobustframeworkforborrowersandlenderstodisclosedatato

demonstrateadherencetothesestandards.TheG20

Transition

Finance

Framework’sfirstpillarformobilisingtransitionfinance

is‘put

inplaceeitherataxonomy

oraset

ofprinciples…to

guidefinancialinstitutions

andrealeconomyfirms

toidentifyand

understand

whattransitionactivity

[is]’.Thesecondpillaraimsto

‘ensurethatidentificationoftransitionactivitiesorinvestmentopportunitiesisbasedontransparent,credible,comparable,accountable,andtimeboundclimateobjectives’(G20SFWG,2022).AttheirFebruary2023meeting,

G20

finance

ministers

andcentralbank

governorsemphasisedtheirdesireto

see

transitionfinanceframeworksprogressed

andagreementof

climatedisclosurestandardsthroughtheInternationalSustainabilityStandardsBoard(G20FinanceMinistersand

CentralBank

Governors,2023).Sustainable

financetaxonomiesaretheprimary

toolforensuringconsistent,rigorous

identification

of

complyinginvestments.Voluntaryor

mandatory

reporting

standards

benchmarktheinvestment’s

performanceusingthese

taxonomies.Governmentagencies,central

banksorregulatorshavetypically

beenresponsiblefordevelopingtaxonomies.

Non-state

actors

oftendevelopstandardsorlabels,thoughincreasinglytheyarebeingput

onastatutoryfooting.Thissectiondiscussesinitiativestakenonthefirsttwopillarsthatcouldaidflows

oftransitionfinancefrom

high-incomecountriestoemergingmarkets.3.1

Transition

taxonomiesandgreentaxonomiesGreentaxonomiesidentifynet-zeroemissionsassetsthatalignwiththeParisAgreement(suchas

electricitygeneratedthroughsolarPV).Thesegenerallysetcriteriaorthresholds

which

exclude

insufficientlygreenassets.11CIFFWP4PolicyBrief:TransitionfinanceforemergingeconomiesHowever,

many

hard-to-abatesectorsdo

nothaveaviabletechnology

forzero-GHGsolutions.Hence,theyarenotregardedaseligiblefor‘green’

finance.

Buthard-to-abatesectorsareanecessarypartof

theeconomyand

willremain

asignificantsourceofGHGemissions

withoutinvestmentto

decarbonisethem.Becauseofthis,governmentsand

regulators

are

introducingtaxonomieswithdifferent

criteriato

handlehard-to-abate

sectors’GHGreductionefforts.Transitiontaxonomiesareapplyingforward-lookingtrajectoriesfor

anindustry’sdecarbonisation,offering

atransparentand

crediblesequenceoflow-emissioninvestmentsratherthanone

fixed

GHGemissionsthreshold.Firmsbenchmarktheirtransitionplansagainstthese

using

short-andmedium-termtargetstoguidetheirGHG

emissionreductions

and

investmentneeds.Financialinstruments

can

referencetheseplansandevaluateperformance

at

the

levelof

awhole

firm

ratherthandiscreteassetsorinvestments

(CBI,2020).Severalkeychallenges

ariseinevaluatingafirm’stransitionplan

orwhenframing

the

transitiontaxonomy

itself.These

include(CBI,2022b):?

Credibility

of

the

transition

plan.

Ensuring

the

plan

is

sufficientlyambitious

compared

to

the

technological

opportunities,measurable

short-

and

long-term

milestones

aredefined

and

thereis

independent

verification

of

progress

and

disclosure

ofperformance.?

Establishing

a

continued

need

for

the

industry.

Many

OECDcountries

are

transitioning

away

from

fossil

fuel

(particularly

coal)power

generation.

But

some

emerging

economies

argue

thatelectricity

demand

outstrips

supply

and

decommissioning

relativelynew

fossil

plant

would

hamper

economic

development.

Henceenergy

utilities

need

transition

finance

fordecarbonisationoftheenergysector.aphased?

Sector-wide

approach.

Focusing

on

individual

companyperformance

encourages

achievement

through

offloading

carbon-intensive

assets

rather

than

decommissioning

them,

flattering

thecompany

but

not

reducing

global

emissions.MSMEs

in

the

supplychain

need

to

be

included

but

smaller

firms

find

adhering

andreporting

on

transition

standards

challenging

due

to

dataavailability,

capacities

and

resources.

A

phased

approach

might

beneededtoreflectsmallerfirms’constraints.Inemergingmarkets

inparticular,inclusionof

local/nationalenvironmentalandsocialissuescan

be

an

additionalchallenge.3.2

International

taxonomies12CIFFWP4PolicyBrief:TransitionfinanceforemergingeconomiesAroundtheworld,30nationalandregionaltaxonomieshavebeenpublished(GTAG,2023).Thisproliferation

is

theresultofcountries’desirestoreflect

nationalprioritiesand

circumstances.

Manybut

notallarebasedon

theEU’staxonomy–the

ChineseandASEANtaxonomiesdiffermarkedly,using

listsof

approvedgreentechnologies

(China)orprinciples(ASEAN)ratherthansector-basedscreeningcriteria.TheEU’ssustainablefinancetaxonomyincludestechnicalscreeningcriteriaforaround70sectors.

Hard-to-abatesectorsthatdonotyethavenet-zero

technologieshavebeenset

interimstandards

basedonthebesttechnologycurrentlyavailable.

Thetechnicalscreeningcriteriaareframedintermsofthe

maximumallowed

GHGemissionsperunit

of

activityor

outputa‘sustainable’firmmay

produce.

TheEUcalculatedthesethresholdsusingcarbondioxideemissions

andactivitydata

submittedbylargecombustionplantsregulatedundertheEU’sEmissionsTradingSystem

(EU-ETS).ThenewMexicanandSouthAfricantaxonomiesdrawon

theEUtaxonomy.

SouthAfricauses

theEUtaxonomyto

definecarbonintensity

thresholdsin

hard-to-abatesectors,basedon

thebest-performingfacilities

operatingwithintheEU(NationalTreasury,2022).TheMexicantaxonomyincludesagricultureandlivestock,whichisexcludedbytheEU.Despiteinvestor

enthusiasm

Japan

hasnot

introducedagreentaxonomy,butitsroadmaps

fortechnologies(describedin

Section3.3)couldbe

useful

transitionpathways

for

aputativetaxonomy(PRI,2023).Canada’sindustry-ledproposedtaxonomyroadmapexplicitlyconsiderstransitionsectors

(SFAC,2022).ASEANcountries

havedevelopedadistinctiveapproachusing

atrafficlightsystemtoidentify‘amber’assets/industriesthatneedfinancingtoreducetheiremissionintensity(ASEANTaxonomy

Board,2023).Amberactivitiesmustmeet

local

environmentalstandards

andhaveconcreteplansto

remedyresidualharm

within

fiveyears.

Indonesia’sgreentaxonomyguidance

includescriteriaforthecoalindustry

(OJK,2022).Theamberstandardforcoalrequirestheplanttousecarboncapture

andstorage(whichisnotyetacommerciallyproventechnology)

andto

remediatesites.Thisproliferation

of

differing

taxonomieshamperscross-bordergreencapitalflowssince

investorshaveto

makejudgementswhetherassetsdeemed

greenbyajurisdiction’staxonomyare

greenintheeyesof

theirowncountry.Thiswillparticularlybe

anissuefortransitionfinance,since

hard-to-abateindustries

alreadystrainagainstgreeninvestors’mandates.Thereare

effortsto

mapthresholdsandcriteriabetweenthetwomost

establishedtaxonomies,theEU’sandChina’s,to

enable

cross-borderflowsof

greencapitalbetweenthetwoblocs.Thereisscope13CIFFWP4PolicyBrief:Transitionfinanceforemergingeconomiestodevelopmoresuchinter-operabilityguidance,butthisisa

cost-intensiveexercise.Apreferredapproachwouldbefortransitionfinance

acrossG20countriesto

adhere

to

a

singlestandardsetofagreedprinciples.3.3

Voluntarystandard-settingand

disclosureAtCOP27,the

UNSecretary-Generallaunchedanewreporton

net-zerocommitmentsbyprivate

actorsto

improvetheintegrityof

net-zeropledges,givenwidespreadperceptions

andevidenceofgreenwashing(UNHighLevelGroup,2022).

Thereareavarietyofvoluntarystandardsfor

setting

goalsanddisclosingachievementsforGHGemissions.Thisallowshard-to-abatefirms

toselectweakerstandardsthatflattertheirperformance

andheightensinvestors’concerns

aboutgreenwashing.Private

organisationsprovidevaluablesupport

totransitionplanning.Thisincludes

developingsectorpathways

(e.g.SBTi,

TransitionPathways

Initiative),dataplatforms

(e.g.Carbon

Disclosure

Project),conveningmarketparticipants

(e.g.ClimateAction100+)ordevelopingscreeningcriteria

(e.g.ClimateBondsInitiative).Togetherthese

serviceshelpensurethatinvesteeshavesufficientlyambitioustargetsand

thattheiractionis

consistent

withthat

ambitionandisdisclosedtostakeholders.Toooften,businessesset

targetswithreferenceto

theircurrentperformance

ratherthanscience-basedpathways.This

makestheirachievementsdifficultto

benchmark

againstthoseoftheirpeersortechnicallyfeasible

(butexpensive)solutions(CBI,2022d).Assetownersandmanagers

with$14trillionunder

management

supporttheTransitionPathwayInitiativemethodology(TPI,2019).Thisfocuses

onacompany’s

management

qualityandcarbonperformance

relativeto

itssectoral

peers.Assessmentshavebeenundertakenforcement,steel,

oilandgas,aluminiumandchemicals.TheCarbonDisclosure

Projectprovidessubscriberswithdataaboutfirms’andpublicbodies’GHGemissionsandtransitionplans.

TheClimateAction100+NetZeroCompany

Benchmark

has

10disclosureindicatorsincludinglong-,medium-and

short-termgoals,capital

allocationandJustTransition(CA100+,2021).CBIisproducingtransitionstandardsfor

hard-to-abatesectorstocomplementits

long-establishedgreentaxonomy.Anexample

isthecriteriaforironandsteel(CBI,2022e).Thesevoluntarystandardshavebeenuseful

forexperimentationandlearning,

butitisimportantthatG20countriesusecommonstandards.TheInternationalSustainabilityStandardsBoard(ISSB)whichbrings

together

many

standard

settingbodies

launchedtheClimate-relatedDisclosuresStandard.