Indian firms risk capital access sans clear transition plans: IEEFA report

IEEFA’s assessment highlights how the country’s reporting framework can strengthen climate-related decision-making in line with global standards.

Mumbai: With global sustainable finance markets increasingly demanding credible transition plans and forward-looking metrics, Indian corporates risk losing access to capital if disclosures remain high-level and unstandardised, according to an assessment by the Institute for Energy Economics and Financial Analysis (IEEFA).

The assessment compares India’s Business Responsibility and Sustainability Reporting (BRSR) framework with the International Sustainability Standards Board’s (ISSB) standards, highlighting key strengths and gaps.

The analysis is based on IEEFA’s climate transition plan framework that is informed by a review of 18 international frameworks, as well as consultations with regulators, companies, investors and research bodies.

IEEFA’s framework is grounded in the Transition Plan Taskforce (TPT) framework, which IEEFA identifies as a robust reference for transition plan disclosures.

“The framework aims to evaluate the quality of climate-related disclosures, the essential elements of transition plans, and how that translates to progress by corporates on climate transition outcomes,” says Shantanu Srivastava, research lead, sustainable finance and climate risk, IEEFA.

“The assessment focuses on whether disclosures are decision-useful for investors seeking to assess transition risk, capital allocation plans and long-term resilience,” adds Tanya Rana, energy analyst at IEEFA.

IEEFA’s framework comprises five major categories: Foundation, Governance, Implementation Strategy, Engagement Strategy and Transparency, but the analysis covers only the first four, as the Transparency category reflects the results of companies’ actions, while the analysis is limited to understanding disclosure regulations pertaining to the transition planning process.

IEEFA’s analysis finds that the International Sustainability Standards Board (ISSB) S2 offers robust climate-specific guidance, while the Business Responsibility and Sustainability Reporting (BRSR) framework adopts a broader, ESG-oriented approach, with limited alignment to climate transition planning needs.

BRSR omits several key elements of credible climate transition planning. These include clear linkages between greenhouse gas targets and transition levers, mandatory scenario analysis, granular governance disclosures (such as climate- related remuneration), and a funding strategy for transition plans.