CDP The State of Play 2023: Climate Transition Plan Disclosure

CDP The State of Play 2023: Climate Transition Plan Disclosure

By Dennis Wan 24 September, 2024

Companies disclosing climate transition plans jumped 44% last year but significant disparities exist in the ‘credibility’ & ambition of these plans says Wan, Head Of Capital Markets APAC at CDP. He shares more key findings from their recent report

The global imperative to limit global warming to 1.5°C has spurred a wave of corporate climate commitments. However, commitments must be delivered through credible plans to achieve them. Climate transition plans outline how organizations intend to align their operations, assets, and business models with climate science.

Companies disclosing climate transition plans jumped 44% last year…

…but significant disparities exist in the ‘credibility’ & ambition of these plans

New analysis by CDP, the world’s independent global environmental disclosure platform, shows that businesses disclosing climate transition plans jumped by 44% last year, with 1 in 4 companies (5,906) reporting to have a plan in place.

CDP’s analysis of over 23,200 company disclosures from 14 industries across 129 countries and regions assessed companies against 21 key indicators of a ‘credible’ climate transition plan. These indicators cover essential areas like governance, emissions reporting, strategy, target-setting, financial planning, and value chain engagement.

While nearly 40% of those already disclose data on the majority of key indicators (14 of 21) needed to properly judge the plan’s overall robustness, significant disparities exist in the ‘credibility’ and ambition of these plans.

Fortunately, Asian companies are emerging as frontrunners.

Asia’s Rising Star

A key finding of the report is the comparatively strong performance of Asian companies in developing credible plans.

Asian companies are emerging as frontrunners

Japan, in particular, stands out as a regional leader, with 32 companies meeting ‘all’ key indicators, a doubling of the previous year. In Korea, KOSPI 200 listed companies outperformed G20 peers, with 75% of companies including data on most key indicators.

On Chinese mainland, 2,814 organizations disclosed on transition plans and although no company met all indictors, 29% of the CSI 300 index disclosed to at least two thirds of the key indicators. With Hong Kong & Taiwan also doing comparatively better, this together demonstrates strong momentum in Asia.

An encouraging global trend is that among the analysis leading 140 companies to disclose all key indicators, 25 companies had no plan two years prior. This shows that companies can develop and disclose a ‘credible plan’ in under two years.

Global Challenges Persist

While the lack of sufficient progress across international geographies indicates that climate transition planning is still inconsistent, it is anticipated that disclosure mandates regionally and for publicly listed companies will begin to impact value chains globally.

Key indicators missing from disclosures were a climate-aligned complete strategy, target setting & financial planning

Overall, only 0.6% (140) of all companies disclosing through CDP reported to all 21 indicators required to judge a plan’s credibility. But almost all of these companies have a historical record of reporting data through CDP year-on-year, demonstrating that consistent climate transparency helps businesses to build credible climate transition plans.

The challenge is large. Among the key indicators missing from corporate disclosures were a demonstration of climate-aligned complete strategy, target setting and financial planning. These are the areas where companies currently struggle most in truly reorienting their business models and practices to align with 1.5°C pathways.

Key Findings

Global Trend: Over a quarter of companies (5,906) disclosed having a 1.5°C-aligned climate transition plan, a 44% increase from the previous year. However, only 2% of companies with transition plans disclose against all 21 credibility indicators.

Asian Leadership: Japan stands out as a regional leader with 32 companies credibly disclosing their plans, double the number from the previous year. South Korea and Taiwan also demonstrate strong performance.

Index Performance: Organizations listed on the FTSEurofirst 300 and KOSPI 200 indices are ahead of their market peers. 77% and 74% of issuer corporates disclosed to at least two thirds of the indicators that make up a credible plan.

Industry Variations: Power generation, financial services, and infrastructure industries had the most sufficient disclosure as 32%, 30%, and 24% disclosing to ‘all’ or ‘many’ of the key indicators in 2023. Conversely, the fossil fuel industry continued to perform the worst.

The Road Ahead

As climate-related regulations tighten globally, the pressure on companies to develop credible climate transition plans will intensify. Standards like the International Sustainability Standards Board (ISSB) and the European Sustainability Reporting Standards (ESRS) will require companies to disclose their transition plans, driving greater transparency and accountability.

As climate-related regs tighten globally, the pressure to develop credible climate transition plans will intensify

CDP’s The State of Play: 2023 Climate Transition Plan Disclosure report serves as a valuable benchmark for companies and investors assessing climate-related risks and opportunities. By highlighting both progress and challenges, the analysis provides insights into the actions needed to accelerate the transition to a low-carbon economy.

Further readings

• CDP Global Water Report 2022 “Riding the Wave” – Key Takeaways – CDP’s new report reveals billions in potential gains for Southeast Asian companies that disclose water risks. Souza, CDP’s Regional Manager for Water Security, shares more key findings
• A Wave Of Change: Companies’ Role In Building A Water-secure World – Despite the pandemic, companies disclosing to CDP are up 20%. Their Laureen Missaire shares the latest trends from their 2020 global water report
• Soaring High Or Scorched Earth? 5 Trends For The Year Of The Dragon — The Dragon is the most powerful animal in the Chinese zodiac so we can expect a strong year with little to no let-up. Is 2024, the year for soaring high or will we go down in flames? Find out in our 5 trends for the Year of the Dragon
• Engaging Investors: A Conversation With Founder Ben McCarron — McCarron, Founder of ARE, talks to us about his work on harmonizing Asia’s banks and the global climate agenda. Are Asia’s banks keeping pace with changing expectations?

More on Latest

• Power Out Risks Rising! 5 Ways Extreme Weather Causes Blackouts — Typhoon Yagi was a wakeup call – even ‘typhoon-resistant’ wind turbines can’t withstand our accelerating climate. And if they’re vulnerable, how about the rest of our unadapted power systems? CWR’s Lam breaks down 5 ways power is at risk
• We never imagined we’d have to urgently deal with fast rising seas — Seas are rising so unimaginably fast that the urge to just give up is strong. CWR’s Tan walks us through 8 things she never imagined & her 3 hopes to slow down fast rising seas
• Coastal Power Blackout – Power assets vulnerable to rising seas demand rethink of energy resilience & transition strategies across North Asia — Sea level rise stress tests showed low national exposure but material exposure for clean energy portfolios & significant threats at province/prefecture levels. What exactly does this mean for China, Japan & South Korea and where are the opportunities, find out in CWR’s new report