News of Sustainability

Why must enterprises undertake a low-carbon transition?

A corporate low-carbon transition means re-engineering production and operations—through technological innovation, managerial upgrades, etc.—so that less carbon is emitted and the business moves toward a green, low-carbon model. The necessity is four-fold. First, climate change is accelerating; almost every country has responded to the Paris Agreement by setting emission-reduction targets, and as the main agents of economic activity enterprises have a responsibility to help meet those targets. Second, China has announced its “dual-carbon” goal—CO₂ emissions to peak before 2030 and carbon neutrality before 2060—backed by a growing policy package; companies must align with this national direction. Third, customers and investors are shifting demand toward low-carbon goods and services; early movers strengthen market share and brand value. Finally, energy-saving and low-carbon technologies often cut operating costs and improve long-term resilience.

How is transition finance linked to corporate low-carbon transformation?

Transition finance is any financial service whose explicit purpose is to help an economic actor move toward net-zero or low-carbon operations. It is intertwined with corporate transformation in two directions. On the supply side, it widens the funnel of capital available to hard-to-abate sectors, giving carbon-intensive firms the funds they need to retrofit, switch fuels or restructure processes. On the demand side, transition-finance instruments embed technical criteria and performance targets (e.g., GHG-intensity thresholds, decarbonisation milestones). Only firms whose plans meet those criteria obtain funding, so finance becomes a lever that propels companies onto a verifiable low-carbon pathway.

What key elements must a corporate transition plan contain?

A credible transition plan should address six building blocks:

a. Destination: quantitative short-, medium- and long-term emissions-reduction objectives that are compatible with global, national and sectoral carbon budgets.

b. Road-map: a technology and timing pathway (fuel switch, electrification, circularity, CCS, etc.) benchmarked against best-available industry standards.

c. Baseline: a full inventory of current Scope 1, 2 and 3 emissions, verified where possible.

d. Capital plan: an itemised estimate of capex and opex, matched to financing sources—internal cash-flow, green loans, transition bonds, equity or public subsidies.

e. Just transition: measures to protect workers and local communities (retraining, social dialogue, supply-chain livelihoods).

f. Governance & disclosure: board-level oversight, periodic progress review, public reporting and, if relevant, third-party assurance.

Why does writing a transition plan matter?

First, it translates intention into an operational checklist, raising internal execution speed and quality while supplying a yardstick for later review. Second, it is fast becoming a gatekeeper for transition-finance products: lenders, investors and export-credit agencies use the plan to gauge ambition and deliverability, and many green-loan or sustainability-linked facilities offer margin reductions only if the plan meets market standards (e.g., EU, ISO or PBoC draft templates). Third, a published plan improves ESG scores and lowers the cost of capital, strengthening competitiveness and reputation.

How does the evolution of transition finance spur companies to draft transition plans?

In April 2024 the People’s Bank of China (PBoC) and six other ministries issued “Guiding Opinions on Further Strengthening Financial Support for Green and Low-Carbon Development”, followed in October by “Opinions on Giving Full Play to Green Finance in Building a Beautiful China”. Together they create four pressure points that make a written transition plan almost obligatory: