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ISSN 2753-7757 (Online)

Sustainable Markets Initiative launches energy transition framework at COP27

9/11/2022

HM King Charles III, EI CEO Nick Wayth CEng FEI and others at Buckingham Palace function Photo: Ian Jones
Energy Institute CEO Nick Wayth CEng FEI (right) at a pre-COP27 SMI event hosted by HM King Charles III (left) at Buckingham Palace

Photo: Ian Jones 

The Sustainable Markets Initiative (SMI) unveiled its new energy transition framework in support of global progress towards net zero greenhouse gas (GHG) emissions alongside the United Nations’ COP27 Climate Change Summit, which is being held in Sharm El-Sheikh, Egypt, on 7–18 November 2022.

Reaching net zero calls for a transformation of how we produce and consume energy. This requires a reduction in emissions while developing green alternatives at the same time, with a particular focus on high-emitting sectors such as heavy industry, energy, transport, and metals and mining.
 

However, despite growing momentum for net zero ambitions from countries, regions and corporates in recent years, there remains a notable gap in the available tools to enable investment in transitioning companies delivering progress across the near-, medium-, and long-term. It is this gap that SMI seeks to address ‘by providing a framework, with underpinning principles, to help stakeholders identify, assess, rank and track companies driving the transition’.

 

The Sustainable Markets Initiative (SMI) was launched at Davos in January 2020 by His Majesty King Charles III in his former role as His Royal Highness The Prince of Wales. It is a network of global CEOs across industries working together to build prosperous and sustainable economies that generate long-term value through the balanced integration of natural, social, human, and financial capital. The Energy Institute is a supporter of the initiative, which was the subject of a session at this year’s International Energy Week.
 

The SMI's new transition framework also offers scope to feed into a transition categorisation methodology developed by SMI ‘to provide some guardrails for investment in transition assets’.
 

In addition, SMI is working with Sustainable Fitch, which will utilise the framework to develop a transition assessment to benchmark and differentiate companies as they transition to a low carbon future.
 

‘Collectively, the SMI transition framework and Sustainable Fitch transition assessment will provide a method to better understand companies’ routes to net zero,’ states SMI.
 

Developed to provide stakeholders with the information they need on performance and progress – and ultimately help mobilise capital into not only ‘green’, but also ‘transition’ developments – a series of indicators have been framed to determine a company’s position on the transition spectrum, based on three attributes:

 

  • Emissions ambition: Scale and pace of forward-looking emissions reductions being pursued, including metrics for the medium-and long-term.
  • Emissions reductions: GHG reductions already delivered against a reported baseline (longer-term reductions) and on average annually in recent years (near-term reductions) – across a company’s operations, products or services, and value chain.
  • Financials: Proportion of annual investment into decarbonising and green activities or products, as well as the earnings that come from these areas over time.

 

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