Policy Brief

PB 2/2024: Enhancing Comparability and Credibility of Transition Plans and Transition Risk Assessment with Standardized Net Zero Scenarios

  • Transition plans by non-financial and financial corporates can fulfill  two central purposes: they can facilitate strategic planning towards net zero 2050 while also helping detect transition risks in the short- and long term.
  • For transition plans to be effective, several challenges must be overcome. These include the lack of standards and comparability, the lack of ambition, and the mismatch in time horizons.
  • So far, neither regulatory nor voluntary initiatives require disclosure of scenarios used or define suitable science-based scenarios for transition plans.
  • The comparability of transition plans can be improved by enhancing the availability of science-based net zero scenarios, including more granular sectoral and regional scenarios and the use of transition indicators.
  • An accelerated transition scenario with a shorter time horizon can address the level of ambition and the mismatch of time horizons, improving transition risk assessments.
  • Harmonization between prudential and non-prudential transition plans is important to avoid potential discrepancies.
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