Emissions Trajectories Versus Targets: A Forward-Looking Signal for Investors

Climate risk models that rely on static emissions data may misprice transition risk across a portfolio. For portfolios with material exposure to SBTi-committed companies, a more relevant signal is both current emissions and how firms are tracking toward (or away from) their stated targets.

In this article, FactSet partner firm Emmi examines that signal by quantifying the gap between target and actual emissions. For illustrative purposes, three companies were selected in the Technology and Automotive industries and FY24 FactSet Carbon Diagnostics data that pairs science-based targets with independent emissions forecasts was used.

Targets and Forecasts Side by Side

For each company, the forecast model uses historical Scope 1 emissions and projects them to 2030 based on recent-year trajectories. The company's stated reduction target gives a separate number: the emissions level it has committed to reaching by that year. Putting both on the same chart shows whether or not a company is on track.

A gap ratio captures that gap in a single number: forecast emissions divided by target emissions at the stated target year. Below 1.0 means the company is tracking ahead of its commitment. Above 1.0 means it is not.

The gap ratios among the three companies from the FY2024 data are: Apple Inc. (Technology) at 3.5x, Toyota Motor Corp. (Automotive) at 6.5x, and Volkswagen AG (Automotive) at 0.69x. The context behind those numbers varies.

Apple

Apple has disclosed a target of -62% Scope 1 by 2030, using a 2020 baseline of roughly 47 ktCO2e. The implied 2030 target level is 17.7 ktCO2e.

The historical data shows the challenge. Apple's Scope 1 of 55,200 tCO2e was unchanged across FY2021, FY2022, FY2023, and FY2024. The model projects that flat trajectory forward: The FY2030 point forecast is 62.4 ktCO2e, with a +/-1 standard deviation range of 54 to 71 ktCO2e. Every value in that range is above the target. The 3.5x gap ratio is a direct function of trajectory. The actual emission path has not moved.

Toyota

Toyota's Scope 1 emissions were stable at roughly 1.6 MtCO2e per year from 2019 to 2021. In FY2022 they rose to 2.56 MtCO2e, a 56% increase, and remained at that level through FY2024. The stated target, anchored against the pre-2022 baseline, implies an interim 2030 level of 857 ktCO2e, with a final target of -68% by 2035.

Toyota's 2024 actual Scope 1 (2.56 MtCO2e) exceeds its stated 2030 target (0.86 MtCO2e) by 3x.

The model, anchored to the post-2022 trajectory, projects 5.53 MtCO2e by 2030 with +/-1 standard deviation ranging from 1.83 to 9.23 MtCO2e. The wide uncertainty band reflects model uncertainty about whether the 2022 increase persists or partially reverses. Toyota’s gap ratio is 6.5x.

Volkswagen

Volkswagen’s Scope 1 peaked at 4.74 MtCO2e in FY2021 and declined to 3.07 MtCO2e by FY2024, a 35% reduction over three years. The stated target is -50% by 2030, implying a target level of 1.98 MtCO2e.

The model, tracking the declining trajectory, projects 1.36 MtCO2e by 2030, 31% below the stated target. VW’s gap ratio is 0.69x, reflecting its model-implied path sits below the disclosure-implied path.

What the Data Shows

Trajectory is the variable that determines the gap ratio. Four years of flat Scope 1 at Apple produces a 3.5x gap. A 56% single-year increase at Toyota produces 6.5x. A sustained multi-year decline at VW produces 0.69x. The target percentage stated in the disclosure is secondary. The actual time series is primary.

The gap ratio is a forward-looking risk signal. There are three potential outcomes by 2030 for a company with a 6.5x gap ratio: a rapid emission reduction not reflected in the historical record, a target revision, or a miss. Each outcome carries different implications for regulatory exposure, abatement capital expenditure, and the cost of future mandatory compliance. The gap ratio does not predict which outcome occurs; it quantifies the distance to the target.

Scope 1 understates the picture for most companies in our analysis. Apple's Scope 3 is roughly 270x its Scope 1. Toyota's is approximately 200x. The analysis above covers only directly controlled emissions. Extending it to Scope 3, where companies have the least operational control, is the natural next step.

What This Means for Institutional Investors

Risk models that use a static emissions baseline could be mispricing climate risk on some holdings. A company with a gap ratio above 3x is being assessed on where its emissions stood at the last reporting date, not where they are heading. For holdings with carbon pricing exposure or regulatory scrutiny, that is a meaningful difference.

The gap ratio changes how to prioritize stewardship in portfolio decisions. A company tracking ahead of its own target, like Volkswagen in this analysis, is materially different in that regard compared to one whose emissions trajectory and commitment target are moving apart. That distinction is invisible without both datasets in the same view.

Neither number is a conclusion. The forecast reflects recent behavior while the target reflects stated ambition. But together they reveal what a static baseline cannot. For portfolios with material exposure to SBTi-committed companies, that is a gap worth closing.

Access the Data

FactSet Carbon Diagnostics provides institutional investors with comprehensive, investor-ready climate risk and emissions data across all major asset classes, supporting 100% asset coverage. Carbon Diagnostics integrates emissions, transition risk, targets, and forecasts into a single Climate Value at Risk (CVaR) framework, translating climate exposure into financially meaningful risk metrics comparable across the current year, 2030, 2050, or any custom target year.

To learn more about the methodology behind the targets and forecasts datasets, visit FactSet Carbon Diagnostics and download white papers from FactSet partner firm Emmi: The Future isn’t Static and The Shape of Things to Come.

This blog post is based on content written by a third-party contributor (Emmi) and does not necessarily reflect the opinion of FactSet. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.