33 ANNEX 4: THE PWC-WWF GERMANY ‘PATHWAYS TO PARIS’ PROJECT ON SECTORAL DECARBONISATION PATHWAYS The EU committed to becoming the first greenhouse gas-neutral continent by 2050. Germany’s Climate Change Act establishes the national goal of greenhouse gas neutrality by 2045. A gap still exists between political goals and current progress. The pace of actual emission reductions in Germany has so far been insufficient and the country is on a trajectory for average temperatures to rise by 3-4 degrees. To successfully limit temperature rise to 1,5 degrees, and to ensure the competitiveness and future viability of the German economy, transition processes must be accelerated and actually implemented. A precise, science-based planning - be it changes in the process or the conversion of the entire business model - at company level forms the foundation for meeting the challenges ahead. Taking into account the individual situation of different sectors and types of business, the Pathways to Paris project aims to encourage close cooperation between the real economy and the financial sector. For both sectors, it is critical to have a thorough understanding of the transformation required to achieve greenhouse gas neutrality, to accept these requirements as a guiding principle for action and to translate them into specific, feasible investment and transition plans. With the help of well-founded, comprehensible plans, financial institutions and accounting firms can classify whether or not a company is on a Paris-compatible transition pathway. As a main objective of Pathways to Paris, WWF Germany and PwC Germany, while sparring with 90 representatives of industry and finance, developed three instruments that are intended to support both groups in the transition process to a low-carbon economy. The instruments will help companies identify and understand the necessary changes for their Paris-compatible emission reduction pathways and implement them strategically. Financial institutions can use the instruments to evaluate a company’s transformation performance and integrate it into a systematic and goal-oriented exchange about their requirements. All three instruments will serve as a foundation for a solution-oriented dialogue between real economy and financial industry. These three instruments are as follows: • A web-based transformation tool first creates a sector-specific transformation pathway that can be used to better understand the minimum requirements of emission reductions compatible with the Paris Agreement. In the second step, companies can test the effects and costs of various reduction measures and visualise their effects in diagrams. Finally, they can use the tool to plan the implementation of the selected measures in a roadmap, and thus assess the necessary investments for the transformation plan over time. • The financial industry can specifically demand and promote the transition of companies. An assessment matrix consisting of cross-sectoral and sector-specific indicators was developed, to help financial institutions to assess these refinements and their progress. • Engagement is a way for financial institutions to accompany companies on their transition pathways: sector- specific orientation frameworks help to assess a company’s transition performance. They contextualise the core measures from the transformation tool as well as the indicators from the indicator system and show how dialogue can be structured. Unique Method Ten sector-based working groups discussed in over 30 workshops how to shift business models to ensure compatibility with the Paris climate target. In each working group, a representative range of companies from the sector was paired with representatives from the financial sector and selected academic experts. With the support of empirical research and in dialogue with the participating companies, the current status of conventional production technologies and alternatives was reviewed, experiences and market assessments shared and the core measures of each sector identified. All assumptions and developments are based on or derived from the decarbonization scenario “ How Germany can reach its climate targets before 2050 “, by Prognos, Öko-Institut, Wuppertal Institut (2021) for Stiftung Klimaneutralität, Agora Energiewende and Agora Verkehrswende 63 . The project was funded by the German Federal Ministry for Economy and Climate Protection (BMWK). Transparency, dialogue and cooperation are essential in order to be able to successfully manage the massive efforts in the short time remaining. 63 Publication - Towards a Climate-Neutral Germany by 2045 (agora-energiewende.de).