Science-based climate responsibility metrics

Physical climate risk data: the more we learn, the less we know? Khalid Azizuddin's recent piece in *Responsible Investor captures well what many practitioners are grappling with today: - asset-level data that remain incomplete or hard to interpret; - physical hazard exposure often disconnected from financial materiality; - little visibility on supply chains or customers; - adaptation and resilience efforts largely ignored; - and a risk of over-simplifying complex realities into a single “score.” Some three years ago, EDHEC Business School set out to address exactly these challenges, working to advance climate risk modelling and make decision-useful for investors, companies, and public authorities. In this work, we have developed: 🔹 a blueprint for a new generation of probabilistic climate scenarios; 🔹 high-resolution geospatial modeling capabilities to allow for geographic and sectoral downscaling, consistent with each scenario; 🔹 an open database of decarbonisation and resilience technologies through the #ClimaTech project, which officially launched this week. While the research is public, the new EDHEC Climate Institute has also been assisting a school-backed venture, Scientific Climate Ratings (SCR), which integrates this research to deliver forward-looking quantification of the #financialmateriality of climate risks for infrastructure companies and investors worldwide. While SCR provides a rating scale for comparability, it avoids the trap of over-simplification. Each rating is backed by probabilistic scenario modelling, analysis of physical and transition risk exposures, and explicit accounting for adaptation measures. The result is a synthesis that remains transparent, interpretable, and anchored in scientific rigour. Together, these initiatives aim to move the discussion from data abundance to decision relevance, equipping practitioners with tools that connect climate science, finance, and strategy.

"Felipe, are there other options beyond #SBTi? Why don't I hear about other standards? I've been receiving this question frequently in conversations with my customers, so I thought it would be helpful to share some insights here. When it comes to driving corporate climate action, several initiatives provide frameworks and methodologies. Here’s a comparison of some key players in the field: "The leader" - Science Based Targets initiative (SBTi): - A collaboration of institutions aimed at increasing corporate ambition on climate action. - Methodology: Independent assessment of companies’ Scope 1, 2, 3 targets, classified into three categories. - Adoption: ~1,200 companies, including Bayer, thyssenkrupp, Saint-Gobain, and PSA. Transition Pathway Initiative (#TPI): - A global initiative led by asset owners and supported by asset managers. - Methodology: Assessment based on publicly available information and classification into five levels. - Adoption: ~370 companies, such as Tesla, P&G, and Ford. X-Degree Compatibility (#XDC): - A science-based climate metric to quantify a company’s contribution to global warming. - Methodology: Emission and economic data are used to calculate XDC value and emission reduction pathways. - Adoption: >30 companies, including BASF, Adidas, and E.ON. The 1.5°C Business Playbook: - An initiative that brings together technology innovators, scientists, companies, and NGOs. - Methodology: Proposed pathway based on the carbon law, which involves halving carbon emissions every decade. - Adoption: No calculation/categorization of companies. ISO Standard on Climate Action (e.g., ISO 14064-1): - Provides guidelines and standards for quantifying and reporting greenhouse gas (GHG) emissions and removals. - Methodology: Focuses on organizational and project-level GHG quantification, reporting, and verification. - Adoption: Widely recognized and adopted globally across various industries for standardized reporting and compliance. ------ Top 3 Key Differences: ------ 1- While SBTi, TPI, and XDC provide specific frameworks for setting and assessing climate targets, the 1.5°C Business Playbook offers a broader pathway approach, and ISO focuses on standardized reporting. 2- Methodology: SBTi and TPI rely on classifications, XDC uses a quantitative metric, the 1.5°C Business Playbook is based on the carbon law, and ISO provides guidelines for GHG quantification and reporting. 3- Adoption: SBTi and TPI have broader adoption among companies, while XDC and the 1.5°C Business Playbook have more specialized use cases. ISO standards are globally recognized and widely adopted across industries. Choosing the right framework depends on your organization's specific needs, whether it's setting science-based targets, aligning with asset managers, quantifying climate impact, following a broad decarbonization pathway, or adhering to standardized reporting. How is your organization navigating these frameworks in its sustainability journey?

I've compressed the 133-page SBTi 2.0 framework into the 9 critical changes that will determine which companies survive the transition. Most sustainability leaders won't make it through the entire document. But mastering these shifts now will position you ahead while others scramble: 1️⃣ Scope separation is mandatory. Version 2.0 eliminates combined Scope 1, 2, and 3 targets, forcing you to address each separately. No more hiding poor performance in one area behind strong results in another. Your CFO will need to sign off on each distinct reduction pathway. 2️⃣ Third-party assurance requirements are stratified. Category A companies (large, developed markets) now need formal verification of base year emissions from accredited bodies. This means sustainability data must meet the same scrutiny as financial reporting. 3️⃣ Net-zero commitments must align with UN HLEG recommendations. Generic pledges are no longer acceptable. Your board now needs to approve specific language on value chain emissions, limited use of offsets, and phasing out fossil fuels. 4️⃣ Two-tier company categorization creates regional fairness. Different requirements for Category A (developed economies) versus Category B (emerging markets) companies recognize varying starting points. But all roads lead to the same verification standards. 5️⃣ Progress assessment has specific mathematical formulas. SBTi will calculate your progress using defined equations, not narrative reports. Your actual reductions will be compared to expected linear progress from base year to target year. 6️⃣ Implementation disclosure is no longer optional. Version 2.0 demands explicit transition plans showing how you'll achieve targets, including capital allocation plans, technology deployment timelines, and policy engagement strategies. 7️⃣ IPCC AR6 pathways replace AR5. The updated pathways reflect more stringent reduction requirements based on latest climate science, meaning your previously approved targets may become obsolete. 8️⃣ Boundary requirements shift from percentage coverage to material sources. Instead of covering arbitrary percentages of emissions, you must address your most relevant sources with detailed requirements for using both absolute and intensity metrics. 9️⃣ Renewal validation introduces rolling targets. When your current target period ends, you must undergo renewal validation and set new targets. There's no resting on past achievements. Most companies have been operating in a world of sustainability theater - setting targets without the systems to verify, track, and prove progress. SBTi 2.0 transforms climate action from vague commitments into a rigorous compliance function with mathematical validation requirements. The companies that will thrive are those already treating carbon like currency - carefully counted, verified, and managed.

SBTi Alert! Today the Science Based Targets initiative released its updated draft of the Corporate Net-Zero Standard for a second public consultation (linked in the comments). As a one-time critic of SBTi and a member of the Beyond Value Chain Mitigation and Removals Expert Working Group, I wanted to take a moment to share my thoughts. This process has been a good-faith effort by SBTi to engage a diverse array of stakeholders to find a workable, science-based standard that maximizes corporate action. It was a process filled with constructive dialogue and meaningful compromise. All of us working on climate should remain supportive of the organization and the standard. All we can ask is that we operate in dialogue with each other and in good faith, and I can assure you as someone who has participated in this process that SBTi and its staff have passed both of these tests with flying colors. Now, onto the draft standard itself. NO ONE will be totally satisfied by this standard. On each contentious issue, for some the standard will go too far and for some it won't go far enough. In my opinion, that's a sign that SBTi did its job. For carbon markets and "beyond value chain mitigation," here are the highlights from a very quick scan of the draft standard: - No more "beyond value chain mitigation." Now we have "taking responsibility of ongoing emissions." - Companies are required to disclose whether they plan to take responsibility for ongoing emissions. - Responsibility for ongoing emissions will be voluntary through 2035, and mandatory thereafter, with two "tiers" of recognition available until 2035. - Companies will apply a carbon price to their unabated emissions, and then spend a minimum of 40% ex-post outcomes (i.e. carbon credits), with flexibility on the rest. - As they progress towards their net zero year, the share of mitigation that represents "long-lived" removals must increase. - At the net-zero year, 41% of mitigation (which at that point is to neutralize residual emissions) must be with long-lived solutions; the remaining 59% can be short-lived. - In the Annex detailing quality criteria, the Standard explicitly provides for mechanisms for compensating for reversals. What this all adds up to is that the new standard immediately provides a clear and compelling incentive for companies to buy high-quality carbon credits from a variety of project types, and increase their purchasing over time, alongside (i.e, not instead of) their work to reduce their emissions. Furthermore, the standard provides a clear role for both conventional (i.e. nature-based) and novel forms of mitigation. Though there is more to analyze, much to comment on, and much room for improvement, on first glance this standard is an incredible leap forward for SBTi and its multiple stakeholders. Congratulations to SBTi for a job well done!

We’re measuring the wrong thing in climate. In the early 1990s, working on AmeriCorps National Service, we pushed a simple but disruptive idea: Don’t measure outputs (books distributed). Measure outcomes (improved reading proficiency). That shift helped redefine how the nonprofit sector thinks about impact. Today, we’re facing the same issue in climate. We are pursuing a clear outcome: ➡️ Limit warming to well below 2°C by 2050. But we’re mostly measuring an output: ➡️ metric tonnes of CO2e reduced. CO2e is useful—but it mainly reflects long-term impact. It doesn’t fully capture what matters most over the next 10–20 years—the critical window for avoiding the worst effects of extreme heat. As we, and a growing chorus of climate leaders know, some pollutants—like methane, refrigerants, and black carbon—drive far more warming in the near term than CO2. So while we track tonnes, we’re not clearly tracking temperature impact over time. We need to connect emissions to outcomes. Alongside carbon footprints, organizations should measure a “Heatprint”—how their actions affect global temperatures across the timelines that matter. That’s the idea behind Global Heat Reduction's Total Climate Accounting: a way to complement CO2e with data that shows real-world heating and cooling impacts, both near- and long-term. Right now, less than 5% of climate finance is targeting the solutions that most directly reduce near-term warming. We can change that. But only if we start measuring what actually matters. Outcomes, not just outputs. #Heatprint #TotalClimateAccounting IPCC Science Based Targets initiative Greenhouse Gas Protocol Beyond Alliance XPRIZE Climate Curve Randy Spock Kevin Sutherland David Babson Max Scher Olga Faktorovich Allen David Bunn #AmeriCorps