4. Metrics & Targets

Explore the Disclosure Recommendations

Element 4 provides the Metrics & Targets of the entity’s transition plan.

An entity shall disclose the metrics and targes that it is using to drive and monitor progress towards its Strategic Ambition. This includes information on any metrics and targets used to manage and monitor impacts and dependencies of the transition plan on its stakeholders, society, the economy and the natural environment (as identified under 1.1 Strategic Ambition). There is no requirement to disclose a metric where it is not used to drive and monitor progress against an entity’s Strategic Ambition.

Understanding the targets an entity has set and the metrics it is using to measure and progress against these targets is integral to the user’s understanding of a transition plan.

Disclosures under this Element enable users to make a judgement about whether the entity is setting meaningful and sufficiently ambitious targets that align with its Strategic Ambition, track progress on an entity’s transition journey over time, and assess performance against, and alignment with, any external benchmarks that the entity has taken into account (see 1.1.c).

Specific considerations in these areas for each of 4.1-4.4 are set out below. In some cases, these are accompanied by examples of how entities are currently disclosing related information in transition plans or other their wider climate-related disclosures.

4.1 Governance, engagement, business and operational metrics and targets

An entity shall disclose information about the governance, engagement, business and operational metrics and targets that it uses in order to drive and monitor progress towards the Strategic Ambition of its transition plan, and report against these metrics and targets on at least an annual basis.

As part of this, an entity shall:

a. disclose any targets it has set, and any targets it is required to meet by law or regulation

b. disclose information about how the targets disclosed under 4.1.a reflect the Strategic Ambition of its transition plan, and how they relate to the actions outlined under 2. Implementation Strategy and 3. Engagement Strategy

c. for each target disclosed under 4.1.a, disclose:

i. the metric used to set the target

ii. the objective of the target

iii. the part of the entity or its activities to which this target applies

iv. the period over which the target applies

v. the base period and value from which progress is measured

vi. any milestones or interim targets

vii. if the target is quantitative, whether it is an absolute or an intensity target

viii. how the latest international agreement on climate change, including any jurisdictional commitments that arise from that agreement, has informed the target

ix. whether and how the target aligns with any pathways disclosed under 1.1.c including, where possible, the expected trajectory of how this target will be achieved

x. any underlying taxonomy, tools, methodologies or definitions on which this metric relies

d. disclose information about its approach to setting and reviewing each target disclosed under 4.1.a, and how it monitors progress against each target, including:

i. whether the target and the methodology for setting the target have been validated by a third party

ii. the entity’s processes for reviewing the target

iii. the metrics used to monitor progress towards meeting the target

e. report against metrics used to assess progress towards the targets disclosed under 4.1.a at least on an annual basis; this shall include:

i. information about its performance against each target

ii. an analysis of trends or changes in the entity’s performance

iii. whether and to what extent (if known) measurements rely on estimated data, and

iv. any revisions to the target and explanation for those revisions.

An entity is likely to use a broad suite of governance, engagement, business and operational metrics and targets to drive and monitor progress towards the Strategic Ambition of its transition plan. For example, it may set operational targets to monitor whether actions outlined under 2.1 Business operations are leading to the desired outcomes.

To understand whether an entity is appropriately monitoring the outcomes of its implementation and engagement strategy, a user will need information about any targets the entity has set and the metrics used to assess progress towards these. To enable interpretation and comparison across entities, users will further value supplementary details about metrics and targets, including any interim milestones or interim targets that the entity expects to meet, as well as details about any underlying taxonomies, tools, methodologies or definitions.

In order to disclose effectively in accordance with 4.1 an entity may wish to consider the following:

In disclosing information on targets related to governance (4.1.a), an entity may consider including any targets in areas such as remuneration (e.g. proportion of individuals with remuneration linked to progress against the Strategic Ambition) (see 5.4 Incentives and remuneration), skills, competencies and training (e.g. percentage of at-risk workers being offered retraining or redeployment) (see 5.5. Skills, competencies and training)

In disclosing information on targets related to engagement (4.1.a), an entity may consider including any targets related to the nature of engagement activities (e.g. number of engagements with suppliers on their transition plans, number of engagements with clients on the just transition) as well as the outcome of the engagement activities (e.g. evidence of GHG emissions reductions by suppliers, evidence of social dialogue in clients’ transition plans). These may relate to engagements with the value chain (see 3.1 Engagement with value chain), industry counterparts (see 3.2 Engagement with industry), and/or government, public sector, communities, and civil society (see 3.3 Engagement with government, public sector, communities, and civil society).

In disclosing information on any targets related to business and operations (4.1.a), an entity may include:

  • targets related to business and operations (e.g. energy efficiency (e.g. energy consumption/ unit produced), the number of factories located in flood zones or percent of water withdrawn in areas with high water stress, the number of sustainable jobs created); and
  • targets related to products and services (e.g. proportion of total or number of products and/or services that are no- or low-GHG or support the transition towards a low-GHG economy, proportion of total or number of products and services vulnerable to transition and physical risks).

  
Providing further details about each target will help ensure that users have the context required to interpret the target. In particular, users will value information about:

  • contextual information required to understand what is being measured and the objective of the target (1.c.i-v; 4.1.c.vii, 4.1.c.x);
  • information about any interim milestones or targets that the entity expects to meet (4.1.c.vi);
  • how the target was informed by or aligns with any external benchmarks, including the latest international agreement on climate change (1.viii-ix);
  • the expected trajectory of how this target will be achieved (1.c.ix) (e.g. information about whether an entity expects a linear reduction or increase towards particular targets, an s-curve trajectory or whether it foresees key “bumps” or sudden changes, for example due to the planned phase out of particular assets).  

  
Where the entity includes nature-related metrics and targets, an entity may find it helpful to align these to the recommendations of the Taskforce for Nature-related Financial Disclosures (TNFD). The entity may also refer to guidance for measuring impacts and dependencies on nature and natural capital, such as Capital Coalition’s Align and Transparent projects. The entity may also want to consider including just transition-related metrics and targets.

Public Disclosure Examples

Please note: Transition planning is an emerging space in which current practice is rapidly evolving. The selected examples should not be regarded as an articulation of “best practice” and come from organisations at different stages of their transition planning journey. They are intended to illustrate the type of information an entity may want to include under a particular Sub-Element to support interpretation of the framework by preparers. It is important to note that selected examples will often not cover the entirety of TPT Recommendations and may sometimes contain information which is relevant to multiple TPT Sub-Elements. Readers should note that some examples are taken from transition plan-related content in entities’ wider climate-related disclosures, as well as content in standalone transition plans.

Example 1:

Example of how an engineering & construction services entity has disclosed information relevant to 4.1.a and 4.1.c.

Source: Buro Happold, Net Zero Routemap, p. 8 & 11, 2023.

4.2 Financial metrics and targets

An entity shall disclose information about the financial metrics and targets that it uses in order to drive and monitor progress towards the Strategic Ambition of its transition plan, and report against these metrics and targets on at least an annual basis.

As part of this, an entity:

a. shall disclose any targets it has set, and any targets it is required to meet by law or regulation; for financial services, this may include targets related to their investment and lending activities

b. shall disclose information about how the targets disclosed under 4.2.a reflect the Strategic Ambition of its transition plan, and how they relate to the actions outlined under 2. Implementation Strategy and 3. Engagement Strategy.

c. shall for each target disclosed under 4.2.a, disclose:

i. the metric used to set the target

ii. the objective of the target

iii. the part of the entity or its activities to which this target applies

iv. the period over which the target applies

v. the base period and value from which progress is measured

vi. any milestones or interim targets

vii. if the target is quantitative, whether it is an absolute or an intensity target

viii. how the latest international agreement on climate change, including any jurisdictional commitments that arise from that agreement, has informed the target

ix. whether and how the target aligns with any other pathways disclosed under 1.1.c including, where possible, the expected trajectory of how this target will be achieved

x. any underlying taxonomy, tools, methodologies or definitions on which this metric relies

d. shall disclose information about its approach to setting and reviewing each target disclosed under 4.2.a, and how it monitors progress against each target, including:

i. whether the target and the methodology for setting the target have been validated by a third party

ii. the entity’s processes for reviewing the target

iii. the metrics used to monitor progress towards meeting the target

e. shall report against metrics used to assess progress towards the targets disclosed under 4.2.a at least on an annual basis; this shall include:

i. information about its performance against each target

ii. an analysis of trends or changes in the entity’s performance

iii. whether and to what extent (if known) measurements rely on estimated data,

iv. any revisions to the target and explanation for those revisions

f. shall disclose an explanation of whether and how the entity is applying a carbon price in decision-making (for example, investment decisions), and the price for each metric tonne of greenhouse gas emissions that the entity uses to assess the cost of its emissions

g. may disclose a single amount or a range in providing quantitative information under 4.2.a–f.

An entity may use financial metrics and targets to drive and monitor progress towards the Strategic Ambition of its transition plan. For example, it may have set targets relating to revenues, capital expenditures, investments in research & development etc. This is particularly likely to be relevant for entities in the financial services sector.

To understand whether an entity is appropriately monitoring the outcomes of its implementation and engagement strategy, a user will need information about any targets the entity has set and the metrics used to assess progress towards these. To enable interpretation and comparison across entities, users will further value supplementary details about metrics and targets, including any interim milestones or interim targets that the entity expects to meet, as well as details about any underlying taxonomies, tools, methodologies or definitions.

In order to disclose effectively in accordance with 4.2 an entity may wish to consider the following:

Examples of possible financial targets (4.2.a) may include:

  • climate value at risk from physical changes in climate and transition to a low-GHG emission economy;
  • no- or low-GHG capital expenditure;
  • no- or low-GHG R&D investments;
  • revenue from no- or low-GHG products and services;
  • proportion of no- or low-GHG financial assets or investments related to total financial assets;
  • proportion of no- or low-GHG long-term capital assets related to total long-term capital assets;
  • percentage of fuel consumed from no- or low-GHG fuels as a proportion of total fuel; and
  • procurement from no- or low-GHG suppliers.

  
Providing further details about each target will help ensure that users have the context required to interpret the target. In particular, users will value information about:

  • contextual information required to understand what is being measured and the objective of the target (2.c.i-v; 4.1.c.vii, 4.1.c.x);
  • information about any interim milestones or targets that the entity expects to meet (4.1.c.vi);
  • how the target was informed by or aligns with any external benchmarks, including the latest international agreement on climate change (1.viii-ix); and
  • the expected trajectory of how this target will be achieved (1.c.ix) (e.g. information about whether an entity expects a linear reduction or increase towards particular targets, an s-curve trajectory or whether it foresees key “bumps” or sudden changes, for example due to the planned phase out of particular assets).

4.3 GHG metrics and targets

An entity shall disclose information about the GHG emissions and removals metrics and targets that it uses in order to drive and monitor progress towards the Strategic Ambition of its transition plan, and report against these metrics and targets on at least an annual basis.

4.3 An entity shall disclose information about the GHG emissions and removals metrics and targets that it uses in order to drive and monitor progress towards the Strategic Ambition of its transition plan, and report against these metrics and targets on at least an annual basis.

As part of this, an entity:

a. shall disclose information about any targets for reducing absolute gross GHG emissions for Scopes 1 and 2 that it has set

b. shall disclose information about any targets for reducing absolute gross GHG emissions for Scope 3 that it has set

c. shall disclose information about any additional GHG emissions targets that it has set (e.g. methane reduction targets)

d. shall disclose information about how the targets disclosed under 4.3.a–c reflect the Strategic Ambition of its transition plan, and how they relate to the actions outlined under 2. Implementation Strategy and 3. Engagement Strategy.

e. may disclose information about any gross GHG emissions intensity targets expressed as metric tonnes of CO2 equivalent per unit of physical or economic output for Scopes 1 and 2

f. may disclose gross GHG emissions intensity targets expressed as metric tonnes of CO2 equivalent per unit of physical or economic output for Scope 3

g. may disclose any targets for increasing GHG removals from activities such as land use, land use change, bioenergy and carbon removal technologies 

h. shall disclose the categories of Scope 3 GHG emissions included within the target disclosed under 4.3.b. and, where it has excluded categories of Scope 3 GHG emissions from its targets, disclose the reason for omitting them, and any steps it is taking to improve monitoring and reporting systems.

i. shall, for each target disclosed under 4.3.a-c, disclose:

i. the metric used to set the target

ii. the objective of the target

iii. the part of the entity or its activities to which this target applies

iv. the period over which the target applies

v. the base period and value from which progress is measured

vi. any milestones or interim targets

vii. if the target is quantitative, whether it is an absolute or an intensity target

viii. how the latest international agreement on climate change, including any jurisdictional commitments that arise from that agreement, has informed the target

ix. whether and how the target aligns with any pathways disclosed under 1.1.c including, where possible, the expected trajectory of how this target will be achieved

j. shall disclose information about its approach to setting and reviewing each target disclosed under 4.3.a-c, and how it monitors progress against each target, including:

i. whether the target and the methodology for setting the target have been validated by a third party

ii. the entity’s processes for reviewing the target

iii. the metrics used to monitor progress towards meeting the target

k. shall report against metrics used to assess progress towards the targets disclosed under 4.3.a-c at least on an annual basis; this shall include:

i. information about its performance against each target

ii. an analysis of trends or changes in the entity’s performance

iii. whether and to what extent (if known) measurements rely on estimated data,

iv. any revisions to the target and explanation for those revisions

l. shall in disclosing information on GHG emissions under 4.3.k,

i. disclose its absolute gross GHG emissions generated during the reporting period, expressed as metric tonnes of CO2 equivalent, classified as Scope 1, 2 and 3 GHG emissions

ii. measure its GHG emissions in accordance with The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004) unless required by a jurisdictional authority or an exchange on which the entity is listed to use a different method for measuring its GHG emissions

iii. disclose the approach it uses to measure its GHG emissions under 4.3.l.i including

      1. the measurement approach, inputs and assumptions the entity uses to measure its GHG emissions
      2. the reason why the entity has chosen the measurement approach, inputs and assumptions it uses to measure its GHG emissions
      3. any changes the entity made to the measurement approach, inputs and assumptions during the reporting period and the reasons for those changes

iv. for Scope 1 and Scope 2 GHG emissions disclosed under 4.3.l.i, disaggregate emissions between

      1. the consolidated accounting group (e.g. parent and its consolidated subsidiaries)
      2. other entities excluded from the consolidated accounting group (e.g. associates, joint ventures and unconsolidated subsidiaries).

v. for Scope 2 GHG emissions disclosed under 4.3.l.i, disclose its location-based Scope 2 GHG emissions and provide information about any contractual instruments that is necessary to inform users’ understanding of the entity’s Scope 2 GHG emissions

vi. for Scope 3 GHG emissions disclosed under 4.3.l.i, disclose:

      1. the categories included within the entity’s measure of Scope 3 GHG emissions, in accordance with the Scope 3 categories described in the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (2011) and, where it has excluded categories of Scope 3 GHG emissions, disclose the reason for omitting them, and any steps it is taking to improve monitoring and reporting systems to enable reporting
      2. additional information about the entity’s Category 15 GHG emissions or those associated with its investments (financed emissions) if the entity’s activities include asset management, commercial banking or insurance

m. may, where relevant, further disclose information about GHG removals from activities such as land use, land use change, bioenergy and carbon removal technologies; this shall:

i. be separately identifiable from information about GHG emissions disclosed under 4.3.l.i and information about carbon credits disclosed under 4.4 Carbon credits

ii. include information about which third-party scheme(s) has or will verify or certify the removals

iii. include information about which standard the removals have been or will be certified against

iv. disclose whether and how the entity identifies and manages the impacts and dependencies of removals on its stakeholders, society, the economy, and the natural environment throughout its value chain, that may give rise to sustainability-related risks and opportunities (for example, this may include an assessment and mitigation of social risks of removals usage (e.g. through human rights impact assessments)).

Metrics and targets on GHG emissions are likely to be a crucial cornerstone of an entity’s transition plan. For users, information on GHG emissions is therefore fundamentally important to their understanding of an entity’s transition plan.

To understand whether an entity is appropriately monitoring the outcomes of its implementation and engagement strategy, a user will need information about any GHG targets the entity has set as well as their GHG emissions. The value of these disclosures will be strengthened if entities disclose information on GHG emissions in a consistent and comparable manner, leveraging authoritative guidance provided by the Greenhouse Gas Protocol, unless otherwise required by a jurisdictional authority or an exchange on which the entity is listed.

In order to disclose effectively in accordance with 4.3 an entity may wish to consider the following:

For further guidance on reporting information about GHG emissions targets (4.3.a-c, 4.3.e-i), an entity may find it helpful to refer to the Application Guidance provided in the IFRS S2 Climate-related disclosures (see B68-9).

For further guidance on reporting information about GHG emissions (4.3.l), an entity may find it helpful to refer to the Application Guidance provided in the IFRS S2 Climate-related disclosures  (see B19 – 63).

The guidance on accounting for CO2 removals (4.3.g & 4.3.m) is still evolving. Where entities reports metrics and targets related to GHG removals, the TPT recommends that they follow the [draft] guidance for Greenhouse Gas Protocol Land Sector and Removals Guidance and the recommendations of the SBTi’s Forest, Land and Agriculture Guidance. For the avoidance of doubt, metrics on CO2 removals and storage shall be clearly separated from targets on GHG emissions and carbon credits. The entity shall further disclose whether any removals have been certified or verified by a third party and, if so, by whom and against which standard.

Public Disclosure Examples

Please note: Transition planning is an emerging space in which current practice is rapidly evolving. The selected examples should not be regarded as an articulation of “best practice” and come from organisations at different stages of their transition planning journey. They are intended to illustrate the type of information an entity may want to include under a particular Sub-Element to support interpretation of the framework by preparers. It is important to note that selected examples will often not cover the entirety of TPT Recommendations and may sometimes contain information which is relevant to multiple TPT Sub-Elements. Readers should note that some examples are taken from transition plan-related content in entities’ wider climate-related disclosures, as well as content in standalone transition plans.

Example 1:

Example of how a bank disclosed information relevant to 4.3.b and 4.3.f: 

Source: Lloyds Banking Group plc, Environmental Sustainability Report, p.28, 2022.

Example 2:

Example of how a financial services entity has disclosed information relevant to 4.3b:

Source: L&G plc, Climate Transition Plan, p.33, 2022. 

Example 3:

Example of how a bank has disclosed information relevant to 4.3b and 4.2.i.ix:

Source: Barclays plc, Annual Report, p.88, 2022.

Example 4

Example of how a packing and paper entity has disclosed information relevant to 4.3.a4.3.b, 4.3.d, 4.3.i.iv – vii and 4.3.i.k. 

Source: Mondi Group, Sustainable Development Report, p. 46, 2022.

 

4.4 Carbon credits

An entity shall disclose information about how it uses or plans to use of carbon credits to achieve the Strategic Ambition of its transition plan, and report on the use of carbon credits on at least an annual basis.

As part of this, an entity shall:

a. disclose an explanation of why the entity is employing carbon credits and how the use of carbon credits supports the Strategic Ambition of its transition plan

b. disclose the number of credits purchased and retired

c. disclose which third-party scheme(s) has or will verify or certify the carbon credits

d. disclose information about which standard the carbon credits have been or will be certified against

e. disclose the type of carbon credit, including whether the underlying offset will be nature-based or based on technological carbon removals, and whether the underlying offset is achieved through carbon reduction or removal

f. disclose whether and how the entity identifies and manages the impacts and dependencies of carbon credits on its stakeholders, society, the economy, and the natural environment throughout its value chain, that may give rise to sustainability-related risks and opportunities (for example, this may include an assessment and mitigation of social risks of carbon credits usage (e.g. through human rights impact assessments))

g. disclose any other factors necessary for users of general purpose financial reports to understand the credibility and integrity of the carbon credit the entity is using or plans to use1

h. report on the use of carbon credits at least on an annual basis.

As entity may decide to use carbon credits as part or in support of the Strategic Ambition of its transition plan.  Good practice transition plans should consider Scope 1, 2, and 3 emissions and should prioritise decarbonisation through direct abatement over purchasing carbon credits.

Users will therefore value information about an entity’s use of carbon credits to understand the relative emphasis on direct abatement versus the use of credits, the integrity of the underlying credits and the expected contributions of these credits to the achievement of the entity’s Strategic Ambition. This information will further strengthen the ability of users to compare transition plans across individual entities, particularly within a sector.

In order to disclose effectively in accordance with 4.4, an entity may wish to consider the following:

In explaining why an entity is employing carbon credits and how this supports the Strategic Ambition of its transition plan (4.4.a), it may consider following the guidance provided by the Science-based Targets initiative (SBTi) and the Voluntary Carbon Markets Integrity Initiative (VCMI) Code of Practice, Annexes, and Supplementary Guidance. Entities should note that the VCMI recommends that companies avoid making compensation claims (see VCMI Supplementary Guidance for guidance on how to communicate claims).  

The TPT recommends that, in disclosing information about which third-party scheme(s) has verified the credits and the standard and methodology that the credits have been verified against (4.4.c-d), an entity discloses whether these meet the Core Carbon Principles (CCPs) set out by the Integrity Council for the Voluntary Carbon Market (ICVCM).

Whether and how impacts and dependencies of carbon credits on stakeholders, society, the economy, and the natural environment are identified and managed is a key quality criterion for carbon credits. In disclosing information about their use of carbon credits (4.4.e.i), an entity may therefore find it helpful to include:

  • information about social and environmental co-benefits arising from the carbon projects that underlie the carbon credits;
  • information about any due diligence processes it has conducted on carbon projects; and
  • information about whether it has chosen credits verified against a standard which takes into account social or environmental integrity.

  
Users will value information on other factors necessary for users of general purpose financial reports to understand the credibility and integrity of the carbon credit the entity is using or plans to use (4.4.f). For example, an entity may consider disclosing:

  • information about whether and how the project contributes to the sustainable development of the host country. For example, by supporting national or international adaptation by setting aside a share of proceeds to support adaptation or investing into beyond-baseline environmental and social impacts associated with the project;
  • proof that the principle of Free, Prior and Informed Consent (FPIC) and Do No Harm were respected with local communities where the project is situated; and, where appropriate, proof that projects respect, and ideally enhance, the rights of Indigenous peoples and local communities (IPLCs); and
  • information about the expected permanence of the carbon credit, including any measures in place to address the risk of reversal as well as measures in place to compensate reversals.

  
For the avoidance of doubt, disclosures under 4.4.a-g are intended to cover both the sale and purchase of carbon credits. In line with the guidance provided by the GHG Protocol, entities who are selling or plan to sell carbon credits to achieve the Strategic Ambition should ensure that there is no double counting between the sold credits and the GHG inventories reported under 4.3 GHG Metrics and Targets.

The TPT further recognises that there is an emerging body of practice around the use of biodiversity credits. Given the nascence of the existing guidance and rapid evolution in this field, the TPT has opted not to provide recommendations or guidance regarding the use of biodiversity credits in transition plans. 

Footnotes:

1. This may include:

  • Proof that the principles of Free, Prior and Informed Consent (FPIC) and Do No Harm were respected with local communities where the project is situated, and, where appropriate, proof that projects respect, and ideally enhance, the rights of Indigenous Peoples and Local Communities (IPLCs)
  • Information about the expected permanence of the carbon credit, including any measures in place to address the risk of reversal as well as measures in place to compensate reversals.