Using Insights from a Corporate Transition Assessment

Banks can use Corporate Transition Assessments to:

• Identify client eligibility for transition finance, including general corporate purpose (GCP) and use-of-proceeds (UOP), while minimizing greenwashing risk.
• Uncover critical dependencies and delivery risks, such as technology, policy, or capital allocation gaps, that could impact the client’s financial profile.
• Inform client engagement by surfacing financing opportunities that would guide clients toward alignment with climate finance best practices.

By integrating Corporate Transition Assessment insights into credit risk and deal origination processes, banks can move beyond high-level client transition risk screening to identify transition-aligned financing opportunities, while maintaining credibility with investors and regulators and meeting internal sustainability targets.

Disclaimer: This archetypal power sector client is an amalgamation of several APAC utilities. 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 an archetype bank’s assessment approach and the learnings are relevant to transition finance practitioners globally.

In this hypothetical case, “the client” is a mid-sized, privately-owned, investment-grade, vertically-integrated power producer with a long-standing relationship with a global bank. Its generation fleet exceeds 2 GW globally, though most of its operations are in the Asia Pacific region (APAC).

The client has built a solid sustainability track record, including the publication of a transition plan and periodic sustainability reporting aligned with Task Force on Climate-related Financial Disclosures (TCFD) recommendations. As part of its transition plan, the client has committed to a reduction in absolute power sector emissions from 7 million tons of CO₂ equivalent (MtCO₂e) in 2020 to 3 MtCO₂e by 2035 by:

• Increasing installed renewable energy capacity by 500 MW by 2030
• Decreasing coal-fired capacity by 500 MW by 2035

The client had also committed to no new coal capacity additions, either through direct ownership or via its engineering procurement and construction (EPC) business.

Most of the client’s coal fleet is in countries with ambitious NDCs and government policies aimed at decarbonizing the power sector. At a regional level, the IEA Announced Pledges Scenario (APS) anticipates the retirement of 843 GW of coal-fired capacity in the Asia-Pacific region by 2050. Additionally, the International Energy Agency projects that the APAC region will add more than 680 GW of new renewable capacity.

As is common practice for transition-focused banks, the bank’s front office was exploring whether refinancing the client’s general corporate purpose (GCP) debt could qualify as transition finance and credibly contribute towards the bank’s sustainable finance targets. To ensure integrity, the bank’s front office requested that the bank’s sustainability team conduct a deep-dive Corporate Transition Assessment.

As part of the Corporate Transition Assessment, the sustainability team analyzed the client’s transition planning, focusing on the feasibility of its generation capacity build-out and phase-out targets. This included scenario alignment benchmarking, investment pipeline analysis — evaluating stated targets versus planned pipelines using third-party business intelligence data, and analysis of key dependencies in achieving its stated targets.

Scenario alignment benchmarking

The sustainability team benchmarked the client’s emissions reduction targets against key reference scenarios from the International Energy Agency (IEA), including the Stated Policies Scenario (STEPS), Announced Pledges Scenario (APS) for APAC, and the Net Zero Emissions (NZE) Global scenario.

The analysis (see chart below) found that though the client was not fully aligned with the most stringent global decarbonization pathway out to 2035, it was nevertheless outperforming regional policy-driven expectations, suggesting a reasonable transition target.

The client’s emissions trajectory was more ambitious than the IEA APS (APAC) pathway, which is a probabilistic scenario reflecting the region’s currently announced national pledges. Given that APS incorporates region-specific political and market constraints, the client’s target represents a realistic and regionally-aligned approach, positioning it above what is currently expected based on existing government commitments across the region. However, the client's pathway did not fully align with the IEA NZE Global scenario, which models the steeper emissions reductions required to limit warming to 1.5°C. While this indicates room for greater ambition, it is important to recognize that the IEA NZE is a normative scenario, optimized to meet a specific climate outcome rather than reflecting current or likely policy environments. Additionally, as a global scenario, the NZE may reflect faster decarbonization expectations in regions such as Europe or North America, which differ materially from the client’s operating context in APAC.

Investment pipeline analysis

The next phase of the Corporate Transition Assessment evaluated the client’s stated capacity targets against its actual installed capacity pipeline across key technologies using third-party asset-level data.

Renewable capacity gaps

The sustainability team compared the client’s stated goal of adding 500 MW of renewable capacity by 2030 with its current asset base and forward pipeline. The analysis revealed a shortfall of approximately 200 MW to meet its 2030 target. A primary driver of this gap was the cancellation of a 300 MW solar and storage project, originally scheduled to enter construction in 2027. The project had been expected to provide a significant share of the client’s near-term renewable buildout; additional capacity is still required to achieve the stated 500 MW renewables build-out target.

Coal phase-out challenges

The client’s transition plan outlined a 500 MW reduction in coal capacity by 2035, including the early retirement of specific coal assets before the end of their economic lives. However, the Corporate Transition Assessment identified that a planned 200 MW early retirement had been cancelled, raising concerns about the feasibility of the broader coal phase-out strategy.

Using third-party data, the sustainability team traced the affected plant’s location to the same jurisdiction as the cancelled 300 MW solar and storage project flagged during the renewables analysis. There was direct dependency between the two assets: the early coal retirement was contingent on new capacity from the solar and storage project to maintain regional energy security and fulfill the client's power purchase agreement (PPA) obligations with its offtakers. The case highlights the risk of concentrated reliance on one project and the importance of a diversified and resilient pipeline.

Upon completing the Corporate Transition Assessment, the sustainability team presented its findings and recommendations to the front office. The sustainability team advised against labelled GCP transition finance at this stage, citing unresolved risks related to the feasibility, consistency, and execution dependencies of the client’s transition plan, particularly around project-level delivery risks.

But rather than the end of the client’s transition finance journey, this assessment represented a foundation for engagement and business development. The bank could advise the client on improvements to the transition plan’s ambition, consistency, and implementation to strengthen the client’s alignment with industry best practices, such as those outlined by GFANZ’s “aligning” category. Subject to the constraints of project economics, the bank could also explore:

• UOP blended finance to accelerate transition under GFANZ’s “managed phase-out” category. Private banks in Asia have increasingly carved out managed phaseout exemptions to their coal exclusion policies.
• UOP project finance of renewables, storage, and grid enhancements that could serve as a stepping stone toward future GCP transition finance, whilst aligning with GFANZ's “climate solutions” category.

While a labelled GCP transaction may not be immediately viable in this hypothetical case, this archetypal client shows a relatively strong foundational ambition. With targeted engagement and focused capital allocation, there would be potential to revisit labelled GCP financing in the future.