Major emitters failing to deliver actionable plans, according to TPI Center annual report, as UK government mulls mandatory reporting.
Large carbon-intensive firms are making “slow progress” in adopting practices needed to reduce their emissions and are failing to provide investors with credible evidence about their transition to a net zero economy.
The findings – from an annual report on the state of corporate transition – come amid new guidance for corporates and financial institutions, as well as a UK government consultation on mandatory transition reporting.
Just 24% of firms were assessed as ‘above par’ in their adoption of management and governance practices needed for effective climate action, in an analysis of more than 2,000 companies, representing three quarters of equities listed globally by market capitalisation, by the TPI Global Climate Transition Centre (TPI Centre) at the London School of Economics and Political Science (LSE).
Around half of firms studied had reached level three of five, meaning they acknowledge climate change as a significant issue, have a policy commitment to take action, have set an emissions reduction target and disclose their Scope 1 and 2 emissions.
Less than half of firms (43%) disclosed material Scope 3 emissions from across their supply chains. Presenting the findings, Simon Dietz, Professor of Environmental Policy at the LSE, said the level was “disappointingly low”, adding that the “slow progress and gradual adoption” of practices by firms described in this year’s report was in line with previous results.
TPI Centre’s analysis of firms’ management quality also revealed low levels of transition preparedness, with fewer than 10% meeting any indicators for detailed and actionable transition plans.
Almost none of the carbon-intensive firms in the study are reporting on the phasing out capital away from carbon-intensive assets (<1%) or how they are aligning spending with long-term decarbonisation goals (2%).
While Dietz described this outcome as “dismal”, he said another measure of transition credibility – based on actual versus predicted progress on decarbonisation – could be read as “reasonably encouraging”.
In most of the eight high-emitting sectors studied, the average reduction rate was sufficient to align with keeping climate change to below 2°C, though not with 1.5°C.
The TPI Centre is the academic partner of the Transition Pathway Initiative (TPI), a global initiative led by asset owners and supported by asset managers with a combined US$87 trillion AUM.
Make it mandatory
The findings were released as the UK government closed its consultation on transition plan requirements, which will inform how it implements a manifesto commitment to mandate regulated financial institutions and large companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement.
Requiring firms to provide detailed transition plans would likely accelerate their efforts to decarbonise their operations, helping the government to meet its legally binding obligation to reach net zero by 2050. It would also help institutional investors to assess the credibility and robustness of the transition plans of firms in their portfolios, enabling them to allocate capital and engage in stewardship activity in support of net zero goals.
However, the UK government will be cautious of introducing rules that are too onerous, both due to the persistent weakness of UK economic growth and its review of non-financial reporting. This aims to streamline and modernise the country’s legal and regulatory framework, with the goal of cutting the costs of regulation for business by 25%.
Speaking at the presentation of the TPI Centre report, Chris Skidmore, Chair of the Transition Finance Council’s (TFC) working group on pathways, policies and governance, said uncertainty over the nature of the net zero transition for particular sectors was a potential constraint on corporate planning.
“The purse strings are not being unlocked because firms don’t necessarily have that mature benchmarking and data to be able to prove what the trajectory is, what’s the opportunity for the investors to come in,” said Skidmore, formerly UK Energy and Clean Growth Minister and leader of the Independent Review of Net Zero.
“That’s a responsibility of government, aside from setting some of the policy frameworks, also [setting] some of those wider investment frameworks needed to back sector transition plans,” he added.
Earlier this week, the TFC released a ‘finance playbook’ intended to unlock transition finance across key sectors by providing guidance on incorporating financing considerations. The aim is to give companies in key sectors a better understanding of – and ability to articulate – the investment requirements of sector-specific transition plans, in order to mobilise investment in a timely and effectively fashion.
The playbook includes a sector-agnostic framework for creating credible, financeable transition plans, guidance on co-creation processes to support collaboration between businesses, finance, and government, and practical steps for designing finance plans that identify financing needs, dependencies, risks and opportunities.
The TFC, which recently consulted on draft guidelines designed to support capital allocation to credibly transitioning entities, also published its first half-year report. The council was co-launched by the UK government and the City of London Corporation in February 2025, following the recommendations of the Transition Finance Market Review.
The International Sustainability Standards Board recently published guidance to help governments to introduce transition-based disclosure requirements, building on the work of the Transition Plan Taskforce, which it assumed responsibility for at the end of last year.
Deferring difficult decisions?
While the consultations and guidance on transition planning are expected to provide greater transparency and incentives to investors over time, the data released this week confirms a mixed picture on the extent to which high-emitting corporates are incorporating material risks into their business strategies.
“The element of predictability is very important to investors,” said Claudia Kruse, Chief Sustainability & Strategy Officer, APG Asset Management, also speaking at the TPI Centre presentation.
The emissions pathways of 554 large firms analysed for TPI Centre’s carbon performance assessment showed little near-term alignment with the most ambitious temperature goals of the Paris Agreement, with around only a third tracking a 1.5°C benchmark by 2027-8. More than half (56%) are not yet on course to be aligned with a below 2°C pathway by 2050. The report said firms continued to defer making substantial emissions reductions into the future, “with few setting ambitious intermediate targets”.
The firms in the sample are on track to overshoot their 1.5°C emissions intensity budget by 61% by 2050, while their ’cumulative benchmark divergence’ from a 2°C budget – reflecting an investor’s financed emissions in a portfolio containing the whole sample – was just 13%.
A separate global study conducted by Boston Consulting Group (BCG) found that fewer companies were publishing comprehensive climate disclosures or setting targets, with just 13% of firms representing 40% of global emissions setting targets across all Scopes 1, 2 and 3.
While the research might suggest stalling momentum, BCG said firms were focusing their efforts around “strategic risk management and compelling financial incentives”, adding that four out of five companies reported financial gains from their decarbonisation efforts.
