An Introduction to Corporate Transition Assessments – Climate Policy Initiative

Assessment of Transition Risks and Opportunities for Corporates in India

Introduction

As India advances towards a low-carbon economy, banks and financial institutions face increasing pressure to evaluate the preparedness of their borrowers in adapting to evolving policy, technology, and market dynamics. This transition aligns with India’s strengthened climate policies, including enhanced Business Responsibility and Sustainability Reporting (aligned with Sustainable Development Goal 12: Responsible Consumption and Production), new guidelines for social and sustainability-linked bonds, and the development of a climate finance taxonomy covering critical sectors such as power, mobility, steel, cement, buildings, and agriculture (SDG 7: Affordable and Clean Energy, SDG 9: Industry, Innovation and Infrastructure, SDG 13: Climate Action).

Additionally, the operationalization of the Voluntary Carbon Market and Carbon Credit Trading Scheme supports emissions reduction targets, particularly in hard-to-abate sectors, contributing to SDG 13: Climate Action.

Scope of Work

The ongoing initiative provides:

1. A structured, step-by-step methodology for conducting corporate transition assessments (CTAs), facilitating alignment with SDG 8: Decent Work and Economic Growth and SDG 12.
2. An illustrative case study assessing an Indian steel company, demonstrating practical application for banks.
3. Sector-specific insights into transition pathways and challenges within India’s steel industry, supporting SDG 9 and SDG 13.
4. Comprehensive analysis of technology, market, and policy dependencies linked to key decarbonization levers.

Roundtable Objectives

This closed-door roundtable aims to:

• Introduce stakeholders to corporate transition assessments (CTAs) as a tool for sustainable finance.
• Share preliminary findings from the application of the methodology in the Indian context.
• Discuss the integration of CTAs into credit decision-making, risk frameworks, and client engagement, enhancing financial sector resilience (SDG 8, SDG 13).
• Collect feedback from banks and financial institutions to refine and strengthen the assessment framework.

Expected Outcomes

• Enhanced familiarity with a practical approach to evaluating corporate transition readiness, supporting informed strategic decision-making aligned with sustainable development.
• Key insights into transition pathways specific to the Indian steel sector, facilitating targeted decarbonization efforts (SDG 9, SDG 13).
• Opportunities for stakeholders to contribute to the development of tools that underpin India’s broader transition finance agenda, advancing SDG 17: Partnerships for the Goals.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 7: Affordable and Clean Energy
   • Article discusses decarbonization levers in sectors like power and mobility, which relate to clean energy transitions.
2. SDG 9: Industry, Innovation and Infrastructure
   • Focus on the steel industry’s transition pathways and technology dependencies highlights industrial innovation and infrastructure development.
3. SDG 12: Responsible Consumption and Production
   • Business Responsibility and Sustainability Reporting disclosures and sustainability-linked bonds relate to responsible production practices.
4. SDG 13: Climate Action
   • Emphasis on climate finance taxonomy, carbon credit trading, and emissions targets for hard-to-abate sectors directly address climate action.
5. SDG 17: Partnerships for the Goals
   • Collaboration between banks, financial institutions, and corporates to assess transition risks and opportunities reflects partnerships to achieve sustainable development.

2. Specific Targets Under Those SDGs Identified

1. SDG 7
   • Target 7.2: Increase substantially the share of renewable energy in the global energy mix.
2. SDG 9
   • Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies.
3. SDG 12
   • Target 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.
4. SDG 13
   • Target 13.2: Integrate climate change measures into national policies, strategies, and planning.
5. SDG 17
   • Target 17.17: Encourage and promote effective public, public-private and civil society partnerships.

3. Indicators Mentioned or Implied to Measure Progress

1. Indicator for SDG 7.2
   • Proportion of energy from renewable sources in total final energy consumption (implied through decarbonization efforts in power and mobility sectors).
2. Indicator for SDG 9.4
   • CO2 emission per unit of value added (industry sector) – implied by analysis of technology and market dependencies in industrial decarbonization.
3. Indicator for SDG 12.6
   • Number of companies publishing sustainability reports (implied by strengthened Business Responsibility and Sustainability Reporting disclosures).
4. Indicator for SDG 13.2
   • Number of countries with nationally determined contributions, climate finance taxonomies, and carbon credit trading schemes (implied by India’s climate policies and emissions targets).
5. Indicator for SDG 17.17
   • Amount of finance mobilized through partnerships (implied by collaboration between banks, financial institutions, and corporates in transition assessments).

4. Table of SDGs, Targets, and Indicators

Source: climatepolicyinitiative.org