2024
This paper sets out the concept of ‘Cumulative Benchmark Divergence’ (‘CBD’) and shows how this new voluntary approach can be applied to help investors better identify transition risk in their assets and portfolios. The CBD approach measures the difference between the decarbonisation trajectory implied by a company’s emissions target and a climate benchmark over the whole pathway. The IIGCC posits that this cumulative perspective better aligns with the way that emissions impact the climate, giving the following example: over 2019-2050, a company which delays emissions reductions until 2049 and then reduces by 100% will emit two and a half times the amount of carbon of a company decarbonising by 7% annually. The paper states that, by using this approach, investors can better understand whether a company’s decarbonisation ambitions are sufficient to meet the net zero goal.
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