Moving beyond decarbonisation

Read this article to understand:

• The importance of holistic stewardship at all levels of influence
• Why it’s time to move beyond decarbonisation targets and towards credible implementation
• How corporate engagement can encourage companies to adopt robust transition plans and deliver value in a decarbonising world

The climate transition is at a crossroads. Ambition is no longer the bottleneck, as corporate net-zero targets have proliferated in recent years. But emissions remain high, and strategic follow-through is inconsistent. The challenge is to ensure companies are doing what it takes to deliver: investing capital with discipline, maintaining operational and financial resilience, applying realistic climate scenarios, and using their influence to transform the system they operate in.

Companies that show agility, foresight, and influence across systems are more likely to preserve value through the low-carbon transition. In fact, we see transition credibility as being financially material, and we assess it with the same rigour as other material risks. That means climate stewardship can no longer just be about endorsing ambition but has to focus on companies’ real-world plans and efforts, to de-risk investors’ capital deployment.

We continue to take a joined-up, holistic approach to climate stewardship (see Only connect: How a holistic approach to investment stewardship can enhance client outcomes).¹ This means we integrate our engagement efforts across multiple levels of influence, from the private assets we own to corporates, value chains and sovereigns. This allows us to connect the dots across the economic and political system (see Figure 1). For instance, we see robust policy as a crucial enabler for companies’ transitions, and one that we aim to support through engagement. However, our focus has evolved, from checking countries and firms’ ambitions to evaluating their preparedness and influence – and helping them create the conditions for success (see below).

Figure 1: Levels of influence

Note: We undertake engagement at each level, but the process may not apply to every holding in every fund. Refer to product prospectuses for further information.

Source: Aviva Investors, August 2025.

Moving beyond a target-centric lens

Over time, we have evolved our approach because targets alone don’t reflect strategic and operational resilience, and many companies are operating in misaligned policy and demand environments. More ambitious commitments are expected in 2025 at Climate COP 30.² However, under current policies, the UN estimates “the world is on track for a global average temperature rise of 3.1°C above pre-industrial levels over the course of the century”.³

Therefore, beyond asking companies what their net-zero targets are, we ask whether they can thrive in plausible low-carbon futures, and maintain financial resilience and value creation. We also ask if companies are actively positioning themselves to enable these futures – for example, through disciplined capital allocation and strategic policy engagement – rather than relying solely on stated ambition.

We aren’t just looking at Paris alignment in the abstract, but also examining the credibility of the entire value proposition: the extent to which company strategy, capital allocation, lobbying, etc. can withstand the structural risks of the transition and how they are positioned to deliver value in a decarbonising world (see Figure 2).

• Capital allocation provides insight into whether firms are aligning investment with a credible low-carbon strategy. The key issue is not only whether spend is labelled “green” or “business as usual”, but how companies prioritise across competing pressures – such as decarbonisation, energy resilience, demand outlook, and financial resilience – when making capital decisions.
• We are also looking for companies to be designing and implementing strategic plans to adapt to the relevant effects of a changing climate – for instance building resilience to a world with more droughts and floods, or rising sea levels.
• We are looking for those plans to account for new technologies – and to leverage them where possible.
• And we are looking for transition plans to explain how companies assess and integrate new technologies – including timelines, cost assumptions, and how they fit into the broader business strategy.
• Finally, we encourage companies to disclose specific policy needs that would help facilitate their transition, explicitly identifying key constraints where further policy action is required.

This framing anchors our stewardship in long-term value creation, not short-term optics, and sharpens the questions we put to companies.

This approach is not limited to listed equity, and our engagement in one area informs our dialogue in others. For example, insights from our corporate climate engagement in Australia have informed collaborative sovereign dialogues on aligning federal policy with national decarbonisation goals (see Sovereign engagement: Driving positive change while delivering long-term value).⁴ In the UK, our sovereign engagement has focused on ensuring charging infrastructure and grid resilience policy keeps pace with the capital allocation required by industry to transition to electric vehicles (see Low Carbon Investment Policy Roadmap).⁵ In private markets, we have financed some renewable energy projects contingent on robust community consultation and involvement.

We also apply this joined-up approach to sector-level challenges. For instance, our value-chain work on decarbonising power has combined engagement with utilities, regulators, and policymakers to endeavour to help create the conditions for credible investment in low-carbon capacity (see Building bridges: Mobilising value chains for decarbonisation).⁶ These interlinked efforts ensure our stewardship can influence not just company-level delivery, but also the broader market and policy frameworks that will allow transition plans to succeed, and ultimately real-world outcomes.

Where this is already shaping outcomes: Case study

We are already seeing the impact of this approach. In one case, we supported a company with modest formal targets, but a clear, disciplined pivot in capital allocation, scenario planning, and ecosystem influence. This nuance is critical. We are not just asking who is saying the right thing, we are asking who is positioned to deliver resilient, low-carbon operational performance.

Conclusion

The transition will be uneven, but companies must prepare, adapt, and lead where possible. As a result, investors can no longer assess climate strategy in silos. We need to evaluate it in the real-world systems where the transition is happening, and across markets, policies, and supply chains. This requires a nuanced and targeted approach. That is what we mean by taking stewardship “beyond decarbonisation”: it isn’t only about asking tougher questions but helping create the conditions for companies to succeed by aligning expectations, capital, and system levers.