Planning to fail? Credibility and financing of corporate transition plans in hard-to-abate sectors

Abstract

This study evaluates whether corporate transition plans align with the objectives of the Paris Agreement, highlighting a structural tension between long-term decarbonization goals and the shorter financial planning cycles that influence investment behavior and corporate decision making. Drawing on the firm-level transition plans and financial data of 411 publicly listed companies in hard-to-abate sectors, the analysis assesses carbon performance alignment across near-term 2027/2028, medium-term 2035, and long-term 2050 horizons. The research examines how specific financial characteristics influence the credibility of corporate climate strategies and identifies leverage points for stakeholders to improve transition plan disclosure. The results show that alignment with a 1.5 °C trajectory is particularly weak in the medium term, precisely when transformative emission reductions are most critical. While many firms articulate ambitious climate commitments, these are often insufficiently embedded in financial planning. Stronger alignment between capital expenditure and climate objectives, alongside lower financing costs, is associated with more credible transition strategies.