The Future Isn’t Static: Repricing Transition Risk with Science-Based Targets

Most transition risk models begin with a simplifying assumption: corporate emissions remain constant. That assumption provides a clean baseline, but it ignores a structural shift already underway. Thousands of companies have published decarbonisation commitments through the Science-Based Targets initiative, with reduction pathways validated against Paris-aligned frameworks. Yet in most investment datasets, those commitments have no impact on projected emissions, and therefore no impact on forward-looking risk.

This research addresses that disconnect directly. More than 4,000 matched absolute Science-Based Targets across 1,775 public companies are converted into forward-looking emissions trajectories and integrated into Emmi’s scenario-based transition risk framework. Each commitment is translated into a projected pathway anchored in observed baseline emissions and compared against a constant-emissions baseline. The result is a direct comparison between business-as-usual and targets achieved.

When those target-aligned trajectories are incorporated, projected Transition Value at Risk (TVaR) generally declines and temperature alignment improves across the covered universe. At the same time, the analysis makes clear where additional reductions are still required under more ambitious IPCC and NGFS scenarios. The framework does not assume perfection beyond what has been committed to, nor does it introduce reductions where none exist. It isolates the conditional impact of delivery.

For investors, the implication is straightforward but significant. If a portfolio has meaningful exposure to companies with validated decarbonisation commitments, treating emissions as static may materially misrepresent forward-looking climate risk. Comparing constant-emissions projections with target-aligned pathways allows investors to assess how much TVaR changes if companies deliver, where residual risk remains, and which holdings are most sensitive to corporate execution. It also provides a clearer basis for engagement, scenario stress testing and capital allocation decisions that explicitly incorporate future decarbonisation.

Science-Based Targets are not merely disclosures. When embedded into emissions trajectories, they change the shape of projected risk. The question is not whether companies have targets, but whether those targets are reflected in how transition risk is modelled.

Download the full white paper to examine the methodology, assumptions and portfolio implications in detail.