Assessing Transition Enablers

Traditional financed emissions metrics may overlook clients that enable other, higher-emitting clients in the same or other sectors to transition. Banks can use corporate transition assessments to effectively identify, engage, and finance these transition enablers (e.g., diversified original equipment manufacturers [OEMs] that supply carmakers). Corporate transition assessments also help banks understand global conglomerates with myriad subsidiaries across various sectors.

Disclaimer: This archetypal automotive OEM client is an amalgamation of several OEMs. The assessment process outlined here is informed by several corporate transition assessments conducted by RMI as well as conversations with global banks. This case study reflects a bank’s assessment approach, and the learnings are relevant to transition finance practitioners globally.

The client is an industrial OEM operating across the automotive value chain. Its businesses include leasing, parts manufacturing, and electric vehicle (EV) charging. While the bank maintains a significant financial exposure to the client, it had historically been considered a lower automotive sector transition priority since the client is not a carmaker.

The bank has primarily used emissions intensity metrics to set targets and manage its automotive sector financed emissions. While these metrics have been effective for clients operating at the core of the automotive value chain — particularly vehicle manufacturers — they have proven less effective in capturing transition-related risks and opportunities across adjacent or enabling segments. As a result, the bank’s current approach has created blind spots in both risk identification and opportunity recognition, limiting its ability to allocate sustainable finance across the broader value chain. In response, the bank's updated sustainable finance strategy has prioritized looking beyond obvious high-emitting sectors to also consider the role of transition enablers.

This client was flagged as both potentially exposed to transition risks because it indirectly depended on internal combustion engine (ICE) vehicle sales and as a potential transition enabler because of its investments in low-carbon technologies and services. The bank’s sustainability team was commissioned to conduct a deep-dive corporate transition assessment to better understand the client's transition risks and opportunities.

Assessing a diversified, global conglomerate like this was challenging due to inconsistent disclosures across a sprawling portfolio of businesses that each have varying transition risks and opportunities.

The sustainability team began with a double materiality assessment to map the client’s businesses against two criteria: (1) the share of revenue each business generates, and (2) the business’s relevance to climate transition pathways. The most material exposures were:

• Parts manufacturing (both drivetrain-specific components and drivetrain-agnostic parts such as tires and chassis parts)
• Leasing and fleet services
• EV charging infrastructure
• Automotive retail and after-sales support (including ICE and hybrid vehicle services)

Next, the sustainability team classified the client’s business activities to categorize how each business is positioned within the transition:

• Transition-agnostic: Businesses with low direct exposure to the drivetrain shifts, such as tire manufacturing and select chassis components. These are not significantly impacted by the transition to battery electric vehicles (BEVs).
• Transition-enabling: Businesses that support wider automotive sector transition and could qualify for traditional green financing, including EV charging, mobility-as-a-service (MaaS) platforms, and EV leasing businesses.
• Transition-exposed: Activities that remain reliant on ICE vehicle demand, such as ICE component manufacturing and ICE-dominated retail channels.

The corporate transition assessment showed the client had material exposure across all three categories and underscored how different businesses had greatly varying contributions to the overall client transition.

To understand the client’s forward-looking strategic outlook, the sustainability team reviewed publicly- available transition-relevant materials since the client does not publish a formal transition plan. The analysis found high-level references to ongoing R&D and investment in enabling segments, including MaaS, EV leasing platforms, and EV charging infrastructure. However, these commitments lacked quantitative targets, financial values, or implementation timelines, making it difficult to determine whether they reflect a credible strategic shift or could present greenwashing risks.

As a final step, the transition assessment evaluated GHG emissions reporting across the client’s businesses and revealed a wide spectrum of disclosure quality. One subsidiary had conducted full Scope 1 and 2 accounting and set reasonable emissions reduction targets. Other businesses, meanwhile, either lacked GHG disclosures entirely or reported inconsistently, without targets or methodological transparency. These inconsistencies in reporting further highlighted governance gaps and raised concerns about the credibility and readiness of the client to support labelled transition finance at this stage.

The sustainability team presented its transition assessment results and recommendations to the bank’s automotive desk. The recommendations centred on 1) strengthening the client’s transition planning, 2) improving internal disclosures, and 3) identifying targeted financing opportunities aligned with the bank’s transition finance strategy.

• Strengthening transition planning

The client could improve its transition plan by taking a system-level view of the automotive value chain. While the client has made selective investments in transition enablers — such as EV charging and mobility services — it remains heavily reliant on ICE-related businesses. The client could quantify targets and financial commitments to these enabling investments and disclose them privately to banks if needed. Additionally, one subsidiary demonstrated strong disclosure and target-setting, which the bank could spotlight as a best practice across the client's other businesses.

• Financing opportunities

The assessment identified potential opportunities for targeted use-of-proceeds financing for businesses focused on EV charging and MaaS, which could be classified as “climate solutions” enablers under the GFANZ transition finance strategies.

The bank evaluated how a complex industrial OEM enables wider automotive sector transition, including the transitions of the bank’s carmaker clients. This case shows the value to banks of looking beyond only conventional financed emissions–based approaches, which sometimes focus narrowly on the most emissions-intensive clients (e.g., carmakers) while overlooking clients operating in enabling roles (e.g., OEMs). Incorporating production-based or activity-level metrics into assessments can provide banks with a more complete picture of a client’s potential contribution or exposure to the transition. This approach opens the door for broader and more inclusive deployment of transition finance.