European companies with validated science-based emissions reduction targets tend to have higher EU Taxonomy capital expenditure alignment, a study found.
A joint analysis released by CDP, a non-profit that runs the global environmental disclosure system for companies, and Clarity AI, the global sustainability technology platform, explored the link between EU taxonomy metrics and indicators of corporate transition, such as green house gass emissions and science-based targets (SBTs).
The EU taxonomy creates a shared language for companies, investors, and policymakers, aiding in recognising environmentally sustainable activities. requires non-financial companies to disclose the proportion of their activities that are taxonomy-eligible and taxonomy-aligned in terms of their revenue, capital expenditures (CapEx) and operating expenditures.
2023 was the first year companies fully reported on EU taxonomy with around 2,000 European companies reporting on EU Taxonomy metrics this year, offering an annual snapshot of their transition progress., highlighted the researchers.
The study revealed that companies with higher taxonomy alignment tend to have validated science-based targets and align revenues and spending with their climate transition. Of the 1,700 companies analysed, 300 have SBTs and more than 600 align revenues and spending with their climate transition plan.
The report underscored the effectiveness of the EU Taxonomy when combined with transition plans, both to set and keep track of decarbonisation actions and support financial planning within a company’s overall transition strategy.
The research focused on 1,700 companies under the Non-Financial Reporting Directive scope that published first-year EU Taxonomy reports.
Maxfield Weiss, managing director for CDP Europe, said: “It is one thing to access the sustainability data and quite another to understand how to interpret and use it. This report shows how foundational data is for transformative change and unlocks this data in the context of transition plans.”
Patricia Pina, head of research at Clarity AI, added: “The financial market should use the EU Taxonomy in conjunction with transition plans to assess the credibility of corporates’ commitments to environmental progress.”
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