TPI sets out net-zero pathways for highest emitting sectors

February 18, 2022

The Transition Pathway Initiative (TPI) has created a framework for assessing corporate decarbonisation progress across the 10 highest emitting economic sectors.

The asset owner-led organisation’s report translates International Energy Agency (IEA) scenarios into sectoral decarbonisation pathways, allowing investors to assess whether companies are on track for net zero by 2050.

The report combines methodologies developed by TPI over the past five years. The resulting pathways can be used by investors to assess how far the companies in their portfolios are aligned with the Paris Agreement.

The sectoral decarbonisation pathways cover energy (electricity, oil and gas), industrials (aluminium, cement, diversified mining, paper and steel), and transport (autos, aviation and shipping). The granular detail allows investors to hold companies to account for their annually reported emissions, against a benchmark appropriate for its industry.

The sector-specific methodologies are based on the sectoral decarbonisation approach, which allocates an absolute, economy-wide emissions budget to each sector. Budgets for most sectors are derived from the International Energy Agency’s three global warming scenarios: Paris aligned 1.5°C, below 2°C and warming resulting from announced national pledges.

The freely available benchmarks cover most lifecycle emissions in each sector, extend out to 2050 and can be adapted to new models and scenarios. In nearly all sectors, company emissions are normalised against a physical output so companies can be compared.

Prof. Simon Dietz, research lead for TPI at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, said: “To allow investors to see whether a company’s emission reduction plans align with the goals of the Paris Agreement, TPI has translated IEA models into decarbonisation pathways for each sector. This report explains our methodology in an accessible way.

“We hope this report catalyses the real economy transition plans that we urgently need to avoid the most catastrophic effects of global warming. It is now time to turn commitment into action.”

Adam Matthew, chair of TPI and chief responsible investment officer of the Church of England Pensions Board, explained that the sectoral decarbonisation pathways meet the demand from all stakeholders “for a credible, rigorous framework for assessing corporate climate change performance”.

Read more about the TPI's work and their updated climate change scenarios here.