In recent years, the Science Based Targets Initiative (SBTi) has very successfully developed a methodology framework for the classification and evaluation of whether company-related emission reduction targets can be considered “science-based”.

The core of the evaluation are global emission reduction scenarios applied in independent assessments of climate targets submitted by companies. The long-term global warming scenarios ("well below 2 degrees", "below 1.5 degrees") are set in relation to the corporate target levels presented and based on a total of 37 criteria applied in the evaluation (Target Validation Criteria). These criteria address central elements for the definition of reduction requirements such as GHG emission scopes 1-3, requirements on specifying interim reduction milestones, reporting and transparency requirements, and more. Thus, the SBT framework and assessment process provides a solid basis for an initial assessment of a company's climate ambition related to what climate science requires, based on reduction pathways derived from global climate scenarios. SBTi offers an approach to the assessment of what otherwise used to be incomparable corporate ambition levels. What SBTi does not provide is a fully comprehensive and regionalized, company-specific assessment of actual transformation measures of an individual company, their planning and implementation pathways. Such a level of detail will eventually be required for investors to assess the actual "Paris- compatibility" of companies and business models. The SBTi is, however, the only independently available benchmark for an initial assessment of the transformation direction of a company.

Driven by the dynamics in the European Sustainable Finance Regulation and in light of international developments, the appropriate degree in assessing the actually targeted and initiated transformation of business models is becoming more and more important. Investors and financiers must increasingly ask themselves - and address this in particular to their portfolio companies – whether these companies are implementing transformation measures based on what science requires to stay within a defined degree of warming. Given the importance of the successful transformation of companies particularly from emission-intensive sectors, those companies presenting comprehensive and robust net-zero strategies should get appropriate access to capital and financing. Further, actual progress of strategy implementation should be tracked and respective transparency requested by investors.  SBTi enables this dialogue based on its global approach, but a deepening and broadening of the analysis is required and currently increasingly being discussed amongst asset owners and investors. Only through this improved and clear classification of transformation ambition and implementation quality as well as evidence will it be possible to meet global GHG budgets and limit the climate crises. Success in combating climate change depends on the successful transformation of emission-intensive business models across entire industries, crucially depending itself on access to capital. Not every company can or does seriously addresses the transformation needs credibly. For investors to come to robust conclusions related to the actual corporate climate performance continually improving the methodology and the instruments available is key. If the transformation pathway analysis does not provide the required detail for engagement dialogues between corporate and investor sides asset owners and investors might feel required to divest from companies, leaving influence on company management to others.

With the confirmation of its SBT in December 2020, SBTi approved of RWE’s target as being at appropriate levels in relation to a global scenario. That SBT sets an initial indicator for investors, but unfortunately does not provide a sufficiently robust assessment of the business model in its regional and regulatory context or its associated risks. Investors currently have to supplement existing assessments such as SBTi’s independently if they want to understand the transition pathway’s ambition and science base. The example of Axa, removing RWE from its list of investable companies as a result of internal analysis demonstrates the need for better and transformation aligned progress analytics.

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