To reach net-zero greenhouse gas emissions by 2050, entities operating in most sectors in Association of Southeast Asian ( Asean ) countries must undergo a major transformation, and the key tool that will enable this transformation is a robust transition plan that is science-based, coherent, comprehensive, transparent, and covers all material scopes of emissions and business activities, according to a recent report.

The report, published by Climate Bonds Initiative entitled Scaling Transition Finance, Asean: The Transition Plan, analyzes the plans of Asean-based entities to assess the current state of transition planning and provide recommendations for next steps.

The entities selected are from a range of hard-to-abate sectors and, where possible, are active in the debt markets. The report focuses on providing good guidance to entities in this space to guide the content and scope of transition plans for a credibly transitioning company.

The report incorporates an analysis of 10 company level transition plans, a checklist to achieve the Five Hallmarks of a Credibly Transitioning Company and guidance for issuers on sustainability-linked bonds ( SLBs ) as transition finance instruments.

Key findings of the report include:

• Many companies are announcing net-zero commitments and efforts are being made to develop transition plans ( also called sustainability strategies, climate policies, climate action plans ) with key performance indicators and sustainability performance targets.
• There is scope for improvement as most of the plans included in the report are fragmented with information contained in multiple locations using different indicators, meaning the assessment of the ambition levels and impacts of the plans is difficult.
• Targets are not yet consistently underpinned by the credible, comparable and costed decarbonization strategies and changes to business practices that are required.

Most entities must transition their activities towards net zero, the report notes, and they should start planning for this as soon as possible. Entities operating in some sectors may not have complete clarity on what precisely needs to be done further down the line, but should nevertheless begin with what is currently practicable.

The report recommends:

• A transition plan should be contained in a single, clearly labelled, easily accessible document.
• The plan should be dated and include an indication of how frequently it will be evaluated to incorporate ongoing developments.
• Labelling and terminology should be applied consistently across the transition plan and related documents.
• Transition plans should address all Five Hallmarks; and, where there are gaps, these should be explained and a clear plan to address these gaps should be included.
• Any organisation planning to issue SLBs should follow the guidance given in the report to ensure the maximum credibility and impact.

“Many companies in the Asean region are operating in traditional hard-to-abate-sectors and must make the most dramatic changes to their business models if they are to survive,” says Sean Kidney, CEO of Climate Bonds Initiative. “The region is one of the most vulnerable to extreme weather, but can take comfort that investors are lining up to pump capital into credible corporate plans on climate transition.”