Net Zero Commitments
DatasetMethodology
S&P Global Sustainable1 – April 2024

Net Zero Commitments Dataset

Table of Contents
Terms and Definitions ............................................................................... 3
Introduction and Context .......................................................................... 3
Data Sources and Collection .................................................................... 4
Methodology Overview ............................................................................. 4
Monitoring and Review ............................................................................. 5
Assumptions and Limitations .................................................................. 6
Updates ...................................................................................................... 6
S&P Global Sustainable1 Disclaimer ....................................................... 7

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Net Zero Commitments Dataset

Terms and Definitions
TermDefinition

Net Zero Commitment

Gross Profit

A target to completely negate the quantity of greenhouse gases produced
by a company over a defined timeframe through reductions in emissions
and implementation of technologies or strategies to offset or remove
greenhouse gases from the atmosphere
A target to reduce the quantity of greenhouse gases produced by acompany by a specified amount (in absolute or intensity terms) over adefined time period
A group of gases that contribute to climate change by absorbing infrared
radiation. This includes, but is not limited to, carbon dioxide, methane andchlorofluorocarbon gases. Greenhouse gases are quantified in terms oftonnes of carbon dioxide equivalent (CO2e)
Total cost of goods sold subtracted from total revenue

Absolute Emissions

Total quantity of greenhouse gas emissions measured in tonnes CO2eEmissions Intensity

Total quantity of greenhouse gas emissions (tonnes CO2e) per $US millionof value added
The Global Industry Classification Standard (GICS) is an industry taxonomy
developed for use by the financial community. The GICS structure includes
163 subindustries.
A future greenhouse gas emissions scenario that is designed to align witha specified change in global mean temperature over a specified time
period, such as 2 degrees Celsius by 2100.

Emissions Reduction Target

Greenhouse Gas

GICS Subindustry

Temperature Scenario

Introduction and Context
Net zero and carbon neutral commitments are on the rise as companies, financial institutions, and countries pledge toreduce emissions, and offset or remove greenhouse gases from the atmosphere. The private sector is an importantcontributor to global greenhouse gas emissions and as such, understanding the likely future emissions of companies isessential to the achievement of national and international climate goals, such as the Paris Agreement and the Net Zero by2050 agenda. Corporate disclosure on emissions reduction commitments is varied, and generally voluntary, with targets
associated with different emissions scopes, baselines, and target years, and varying use of offsets and carbon removals
to achieve corporate goals. Investors require consistent and standardized data on company emission reduction
commitments and future emissions trajectories to inform investment strategies, engagement and reporting activities.
The S&P Global Sustainable1 Net Zero Commitments Dataset offers comprehensive data on the emissions reduction
commitments and future emissions trajectories of companies identified as having net zero or equivalent targets andcommitments. The current coverage of the dataset is ~2,700 companies and 4,989 unique targets, however this is expected
to grow over time as more companies make climate commitments. Key features of the dataset include:•Emissions Reduction Targets: Comprehensive and standardized data on the emissions reduction commitments ofcompanies with published net zero or equivalent targets, including information on the baseline, target year, scope,emission reduction magnitude, and the intended use of carbon offsets and permanent carbon removal technologies.

•Indicators of Target Comprehensiveness and Target Achievement: Indicators of the degree to which full value chain
corporate GHG emissions (Scope 1, 2 and 3) are covered by a given target, and whether a given target is on track to beachieved based on realized medium term historical emissions reduction performance. This analysis is informed byhistorical data on absolute greenhouse gas emissions and emissions intensity from the past five years of disclosure
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Net Zero Commitments Dataset••

sourced from the Trucost Environmental Dataset which is compiled from company reporting and advanced modelling
techniques.1
Forecasted Emissions: Projected future greenhouse gas emissions based on (1) identified emissions reduction targetsand (2) business-as-usual (GICS sub-industry) trends, from the first year following the latest full year of emissions
available through to 2050 for Scopes 1, 2 and 3 greenhouse gas emissions.
Climate Scenario Comparisons: Comparison of projected future greenhouse gas emissions with established futureclimate scenarios published by the International Energy Agency (IEA), Science Based Targets Initiative (SBTi) and theInternational Institute for Applied Systems Analysis (IIASA).

Data Sources and Collection
The Net Zero Commitments Dataset methodology is built upon the following key data sources:•A database of company greenhouse gas emission reduction targets compiled by S&P Global Sustainable1 fromcompany sources such as annual reports and sustainability reports and company webpages, and from otherpublished sources such as CDP.

•The Trucost Environmental Dataset which offers Scope 1 and 2 and Scope 3 upstream and downstream absolutegreenhouse gas emissions based on company reporting and best in class estimation techniques.

•S&P Global Capital IQ company reference data including time series data on company gross profits.

•Temperature aligned climate scenario datasets published by authoritative sources such as the International
Energy Agency (IEA), Science Based Targets Initiative (SBTi) and International Institute for Applied Systems
Analysis (IIASA) which publishes scenarios for use by the Intergovernmental Panel on Climate Change andNetwork for Greening the Financial System.

•Information on targets that have received a third-party validation
Based Targets Initiative.

, sourced from the ScienceMethodology Overview
The S&P Global Sustainable1 Net Zero Commitments Dataset methodology is based on the following key analytical steps:
1.

Characterisation of Historical Emissions Performance and Targets: S&P Global Sustainable1 combines publishedcompany emissions reduction commitments with reported and estimated historical emissions data to characterize
company projected future greenhouse gas emissions pathways, and alignment with climate scenarios including arange of published net zero emissions scenarios. This involves the following steps:•Calculate Expected Annualized Reduction: The expected annual rate of emissions reduction is calculated
net-zero and interim greenhouse gas emissions targets where identified,1

S&P Global Sustainable 1. 2020. Trucost Environmental Data Methodology Guide. [Online].
https://www.support.marketplace.spglobal.com/en/datasets/alternative/trucost_environmental/trucost_environmental_data_method
ology_guide.pdf

Proprietary and Confidential: Intended for Recipient only. Further distribution or publication of the content in any form
requires S&Pprior written consent.

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Net Zero Commitments Dataset

including the targeted percentage reduction in greenhouse gas emissions and the target timeline (from thelatest financial year to the target horizon year).

2.

•

Estimate Historical Performance Trend: Actual emissions for each company are evaluated for the past fiveyears of GHG emissions history and a linear regression model is fitted to calculate the historical emissions
reduction trend based on all available datapoints.

•Benchmark Historical Performance vs Future Commitments: Company historical emission reduction
performance is compared with the required annualized rate of emissions reduction to meet each of a, representing the constant compound annual rate of change required to meet thefull targeted reduction between the target baseline year and horizon/end year. In cases where a target baseline
year is not disclosed, the required annualized rate of emissions reduction is calculated by assuming the target
announcement year is the baseline year, and if baseline and announcement years are both undisclosed, therequired annualized rate of emissions reduction uses the latest year of historical GHG in their place. If thehistorical rate of reduction is at least 90% of the required rate of reduction under a target, then company
performance is assessed as Likely to meet that target if recent performance continues. If the historical rateof reduction is less than 90% of the required rate of reduction, the company is assessed as Unlikely to meetthat target if recent performance continues.

Forecasting of Company Future Emissions:stated emissions reduction targets and business-as-usual emissions growth assumptions. The process is as follows:•Estimate GICS Sub-industry Trends: The historical annual growth rate in greenhouse gas emissions (CO2e) per$US million of value added and historical annual growth rate in value added are combined to create a businessas-usual forecast for the period from the latest full financial year recorded in the Trucost Environmental
database to 2050 and aggregated to averages for each GICS sub-industry. Value added is used as a proxy forcompany activity growth. This historical emissions intensity is used to project the future emissions trajectoryfor each company assuming the absence of an emissions reduction commitment, based on GICS sub-industrytrends.

•Forecast Future Emissions: Future emissions are projected for each company for Scopes 1, 2 and 3 based on
the historical performance trend, the GICS subindustry trend and the annualised rate of emissions reduction
identified greenhouse gas emissions reduction targets (calculated at Step 1)
for the period from the last historical year of performance available through to 2050. If a company has settargets with a target year prior to 2050, emissions for the remaining period to 2050 are assumed to follow theGICS sub-industry trend. A business-as-usual emissions trajectory is also estimated based on the GICS subindustry trend, without adjusting for any greenhouse gas targets. Comparison of future forecast emissions
with the business-as-usual scenario aids the quantification of the additionality of emissions reductions
targets through 2050.

•Temperature Scenario Alignment: Forecasted future emissions for each company can be compared with auser selectable range of temperature aligned scenario options (e.g., 1.5 degrees, 2 degrees) published by theIEA, SBTi and IIASA to determine the alignment of forecasted company emissions pathways with eachscenario. Such comparisons are based on an absolute contraction method wherein it is assumed a company
should make the same percentage reduction in absolute GHG emissions per year as the user selected scenario
over the relevant time period.

Monitoring and Review
S&P Global Sustainable 1 applies a rigorous quality assurance process to the development and ongoing maintenance andenhancement of the Net Zero Commitments Dataset based on input data validation, model unit testing, output datavalidation and benchmarking against current solutions (Trucost Paris Alignment Dataset), quarter on quarter comparisonand delivery channel validation.
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requires S&Pprior written consent.

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Assumptions and Limitations
Key limitations of S&P Global S

Commitments Dataset include:•Emissions Imputation: Historically S&P Global Sustainable1 has identified incomplete and missing data points in thedisclosed greenhouse gas emissions data used to assess historical company performance. As such, S&P Global
Sustainable1 applies the following assumptions to address these cases (i) if a missing datapoint falls between atleast two valid data points, a linear interpolation method is applied to estimate the missing datapoints, and (ii)wheredata is missing for the most recent historical years, emissions for the missing years are assumed to be the same as
the latest available year. This approach implicitly assumes no emissions reduction in the absence of evidence.

•Sub-Industry Trends: Future activity levels and greenhouse gas emissions are projected based on historical GICS
sub-industry trends using time series data from 2005 to the latest full financial year in the Trucost Environmental
Dataset. While this approach offers a robust foundation for future trend projections, historical activity growth may
not be a reliable indicator of future growth, particularly in the context of the transition to a lower carbon economy.

•Profit Adjustments: Forecasted company gross profit data, based on GICS sub-industry trends, is used as a proxy for
future company growth and activity, and in turn in the estimation of future emissions under a business-as-usual
scenario. GICS sub-industry activity growth trends are adjusted based on the historical average US GDP price deflator(World Bank) to account for the impact of macroeconomic factors on company profits and, by extension, theiremissions.

•Achievement of Company Targets: S&P Global Sustainable1 calculations of target-adjusted forecasted future
emissions pathways are based on the assumption that targets will be met on time and in a smooth annualized
decarbonization rate based on a geometric rate of decarbonization between most recent available historicalemissions and the horizon year(s) of company disclosed targets. Other patterns of achievement are possible
outcomes including (1) non-achievement, (2) faster achievement, (3) slower achievement, and (4) achievement oftargets at a non-linear rate. Companies regularly announce new targets and revise their existing emissions reduction
targets, which may cause delays in S&P Global Sustainable1 identifying them.

•Coverage of Company Targets: Automated screening of company annual reports, sustainability reports and otherreports using automated text searching techniques was used to help inform the prioritisation of companies for datacollection. S&P Global Sustainable1 also draws on other information, such as a variety of public databases andindustry publications to further refine the prioritization of companies for data collection. While these approaches
have proven to be an effective means of identifying companies with relevant disclosed net zero and other emissions
reduction targets,
it is possible that some relevant targets or commitments may not yet have been captured in the dataset at the timeof publication. S&P Global Sustainable1 is continually refining its process and expand the collection of emissions
reduction targets, especially as company reporting evolves and new commitments are made.

Updates
The Net Zero Commitments Dataset is updated at least annually.

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Net Zero Commitments Dataset

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