Climate risk assessments and science‐based targets: A review of emerging private sector climate action tools

Abstract

With the retreat of the United States from the Paris Climate Agreement, the campaign to enroll corporations and other private sector actors into the climate governing arena has accelerated. The tools used by such actors in addressing climate change are similarly expanding. While carbon footprints and carbon offsets have been previously underscored as the chief climate action tools to date, climate risk assessments and science-based targets have been proposed as new quantitative tools to mobilize corporate action against climate change. This article presents a review of these two tools, arguing for more comprehensive and sustained scholarly investigation into each. Following overviews on the early developments of each tool, related academic research is considered in an effort to point toward future research priorities. These priorities emphasize generating empirical data around each tool's origins, diffusion, and impacts (social, economic, and environmental) so that more robust academic debates might occur on the role of science-based targets and climate risk assessments in advancing effective polycentric climate governance.

Science-Based Targets: On Target?

“…This study does not assess the target-setting methodology or whether this aligns with national or global decarbonisation pathways. Nor does this study examine broader impacts (e.g., social), equity or governance issues, such as those identified by Walenta [20]. These considerations will be best addressed by further studies.…”

“…Such an assessment requires additional data collection, as current sustainability rating schemes do not contain sufficient information to fully determine corporate performance against climate goals [19]. One study in particular calls for greater empirical evidence to evaluate the role of SBTs as an emerging corporate climate governance tool [20].…”

Are green bonds funding the transition? Investigating the link between companies’ climate targets and green debt financing

“…In this polycentric approach to climate governance, non-party stakeholders such as corporations complement and stimulate the legal and policy frameworks set by the UNFCCC (Chan, Brandi, and Bauer 2016). However, if and how corporations use climate targets to define their climate actions and facilitate the necessary investments needed for their economic transition is not well understood (Walenta 2020).…”

“…Concretely, science-based targets (SBTs) have been proposed as a tool for corporates to set emission reduction targets that are in line with a scientifically determined emission budget allowable under a 2°C or 1.5°C warming scenario (Walenta 2020). How SBTs are set depends on the methods and principles used to allocate the overall emissions budget to companies (Bjørn et al 2017;Haffar and Searcy 2018;Krabbe et al 2015).…”

“…The linear emission reductionwhere all companies reduce their absolute emissions at the same rate approach, and the sector-based allocation approachwhere all companies in a given sector set emission targets that consider sectoral differences and sector-specific and abatement potentials are the two most established science-based approaches used by corporations to set climate targets (Faria and Labutong 2019). Both are accepted by the Science Based Targets initiative (SBTi) which is behind the mainstreaming of SBTs in corporate transition risk management (Walenta 2020).…”