3 CONTENTS © 2022 © 1986 Panda symbol WWF – World Wide Fund for Nature (Formerly World Wildlife Fund) ® “WWF” is a WWF Registered Trademark. WWF European Policy Office, 123 rue du Commerce, 1000 Brussels. For contact details and further information, please visit our website at www.wwf.eu Authors Antoine Pugliese, Sustainable Finance Expert, WWF France, [email protected] Mobile +33 6 02 09 92 44 Sebastien Godinot, Senior Economist, WWF European Policy Office, [email protected] Mobile +32 489 461 314 Special thanks The authors would like to thank all those who provided valuable inputs and/or reviewed this report, notably: Agnese Ruggiero (Carbon Market Watch), Joost Mulder (Better Europe), Paul Schreiber (Reclaim Finance), Julia Symon, Paul Fox (Finance Watch), Pietro Cesaro, Tsvetelina Kuzmanova, Pierre Garrault, Jurei Yada, Johannes Schroeten (E3G), Jan Vandermosten, PRI Within WWF, the report benefitted from inputs and/or review from: Vanessa Balmer, Leonie Ederli-Fickinger, Philippe Diaz, Jochen Krimphoff, Matthias Kopp (WWF Germany), Margaret Kuhlow, Elisa Vacherand (WWF International), Donald Linderyd (WWF Sweden), Alison Midgley, Jon Dennis (WWF UK), Inès Abbas, Camille Maury, Henry Eviston, Vedran Kordic, Romain Laugier (WWF European Policy Office) Copyright Credit © Phil Desforges EXECUTIVE SUMMARY 4 INTRODUC TION 6 1. EFFECTIVENESS: MANDATORY CORPORATE SCIENCE-BASED TARGETS AND TRANSITION PLANS ARE A MUST TO ACHIEVE EU SUSTAINABILITY OBJECTIVES 7 1.1. THE GROUND OF CORPORATE TARGETS AND TRANSITION PLANS 7 1 .2. THE UTMOST IMPORTANCE OF SCIENCE-BASED ENVIRONMENTAL TARGETS 8 1 .3. MANDATORY SCIENCE-BASED TARGETS AND TRANSITION PLANS ARE A WIN-WIN 8 1 .4. THE NEED TO ENSURE CONSISTENCY IN EU REGULATORY REQUIREMENTS ON CORPORATE TARGETS AND TRANSITION PLANS 8 1 .5. EU CORPORATE CLIMATE TRANSITION PLANS 10 1 .6. EU CORPORATE NATURE AND BIODIVERSITY TRANSITION PLANS 10 2. FEASIBILITY: SEVERAL ROBUST MARKET PRECEDENTS 12 2.1 THE CLIMATE SCIENCE-BASED TARGET INITIATIVE (SBTI) 12 2. 2. THE SCIENCE-BASED TARGET NETWORK (SBTN) 12 2. 4. THE TASKFORCE ON NATURE-RELATED FINANCIAL DISCLOSURES (TNFD) 1 3 2.5. THE GLASGOW FINANCIAL ALLIANCE FOR NET ZERO (GFANZ) 1 3 2.6. THE CLIMATE BOND INITIATIVE (CBI) 1 3 2.7. THE G20 SUSTAINABLE FINANCE WORKING GROUP 1 3 2.8. THE IFRS CLIMATE-RELATED DISCLOSURES 1 3 2.9. THE US SECURITIES AND EXCHANGE COMMISSION (SEC) 1 4 2.10. THE UK TRANSITION PLAN TASKFORCE (TPT) 1 4 3. NECESSITY: THE LIMITATIONS OF EXISTING INITIATIVES 16 3.1 LACK OF SCALE AND SPEED: TOO FEW COMPANIES 16 3. 2 LACK OF QUALITY CHECK: MOST INITIATIVES ARE NOT REQUIRING INDEPENDENT ASSESSMENTS OF TARGETS AND TRANSITION PLANS 17 4. CONCRETENESS: OVERVIEW OF THE NECESSARY EU REGULATORY CHANGES 18 4.1. THE RELEVANT EU REGULATIONS TO ENSURE A CONSISTENT EU FRAMEWORK ON CORPORATE TARGETS AND TRANSITION PLANS 18 4 .2. THE ARTICULATION OF CORPORATE TARGETS AND TRANSITION PLANS WITH THE EU EXTENDED ENVIRONMENTAL TAXONOMY 20 4 .3. FIVE STEPS TO BUILD A COMPLETE EU FRAMEWORK ON CORPORATE TARGETS AND TRANSITION PLANS 21 4 .4. ENTRY INTO APPLICATION TIMELINE 23 4 .5. FIVE POLICY RECOMMENDATIONS TO ENSURE CONSISTENCY ACROSS EU REGULATIONS ON CORPORATE TARGETS AND TRANSITION PLANS 23 5.MONITORING: BUILDING AN EU SUPERVISORY FRAMEWORK FOR CORPORATE TARGETS AND TRANSITION PLANS 25 5.1. A SUPERVISION PROCESS SHOULD BE PUT IN PLACE 25 5. 2. MARKET AVAILABILITY OF TARGET AND TRANSITION PLAN ASSESSMENT TOOLS 26 5. 3. THE NEED TO DEVELOP EU 1.5°C SECTORAL DECARBONISATION PATHWAYS TO EASE THE CORPORATE TARGET AND TRANSITION PLAN ASSESSMENT 26 ANNEX 1: ANALYSIS OF INITIATIVES PRODUCING CORPORATE TARGET AND TRANSITION PLAN CONTENT 28 ANNE X 2: BEST PRACTICE PRINCIPLES ON CORPORATE CLIMATE TRANSITION PLANS 29 ANNE X 3: THE FRENCH SECTORAL TRANSITION PLANS 30 ANNE X 4: THE PWC-WWF GERMANY ‘PATHWAYS TO PARIS’ PROJECT ON SECTORAL DECARBONISATION PATHWAYS 32