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Definition

Climate Transition Benchmark (CTB)

An EU Climate Transition Benchmark starts with portfolio emissions per EUR million of company value, or total emissions for some corporate debt, at least 30% below its eligible pool and requires that measure to fall at least 7% yearly.

What is a Climate Transition Benchmark?

An EU Climate Transition Benchmark (EU CTB) selects, excludes, or reweights investments to follow a measurable reduction in Scope 1, 2, and 3 GHG emissions under Regulation (EU) 2016/1011.

Why does a Climate Transition Benchmark matter to you?

You may see the label in an index methodology, fund document, or investor request. A constituent's emissions, company value, and targets can affect its weight. Check the eligible investment pool, base year, data provider, estimation method, exclusions, and annual calculation.

How does a Climate Transition Benchmark work?

GHG intensity is tonnes of carbon dioxide equivalent per EUR million of enterprise value including cash (EVIC). EVIC combines equity, debt, and non-controlling interests without subtracting cash. The benchmark starts at least 30% below its investable universe, the eligible pool. For listed equity, it must cut GHG intensity by an average of at least 7% a year. For corporate debt from an issuer with listed equity, the rule may use GHG intensity or total emissions; for other corporate debt, it uses total emissions. The reduction compounds from the prior year. If average constituent EVIC changes, adjust each constituent's EVIC before the annual comparison.

What mistakes should you avoid?

  • Testing the 30% cut against a convenient parent index instead of the full investable universe.
  • Checking individual companies but not the weighted benchmark result.
  • Ignoring the EVIC adjustment when average company values change.
  • Applying the EU Paris-aligned Benchmark's 50% starting cut and extra fossil-fuel revenue exclusions to an EU CTB.

Is an EU CTB the same as an EU Paris-aligned Benchmark?

No. An EU Paris-aligned Benchmark starts 50% below its investable universe and has extra fossil-fuel revenue exclusions. An EU CTB starts at 30%. Both follow the 7% annual path.

Can a New Zealand company be part of an EU CTB?

Yes. A New Zealand issuer can be included when its securities and the benchmark meet the applicable decarbonisation, data, allocation, and exclusion rules. The issuer's home country does not determine the benchmark's label.

Example

Suppose a hypothetical commercial printing company in New Zealand is a listed constituent with 20% of an equity EU CTB. In the base year, its GHG intensity is 60 tCO2e per EUR million of EVIC. The other constituents average 120 on the same basis. The benchmark result is 108: (20% x 60) + (80% x 120). The investable universe averages 180, so the 30% ceiling is 126: 180 x 70%. The result is 18 below that ceiling.

One year later, average constituent EVIC has risen from EUR 250 million to EUR 260 million. The Article 7(3) adjustment factor is 1.04: 260 / 250. The printer's raw EVIC is EUR 52 million, so its adjusted EVIC is EUR 50 million: 52 / 1.04. With 2,400 tCO2e, its adjusted intensity is 48: 2,400 / 50. If the other constituents now average 108, the weighted benchmark result is 96: (20% x 48) + (80% x 108). The annual trajectory ceiling is 100.44: 108 x 93%. The benchmark is 4.44 below the ceiling.

Where it comes up

EU CTB definition and measurable decarbonisation pathRegulation (EU) 2016/1011, Article 3(1)(23a) and (23c)Official sourceEU CTB annual reduction and EVIC adjustmentDelegated Regulation (EU) 2020/1818, Article 7(1)-(4)Official sourceEU CTB baseline comparison and exclusion disclosureDelegated Regulation (EU) 2020/1818, Articles 9-10Official sourceEU CTB estimation methodology, trajectory disclosure, and emissions-data standardsDelegated Regulation (EU) 2020/1818, Articles 13-15Official source

Related terms

Portfolio carbon footprint

A portfolio carbon footprint sums the GHG emissions attributed to investments and usually divides that total by portfolio value to report tonnes of carbon dioxide equivalent per million invested.

Weighted average carbon intensity (WACI)

Weighted average carbon intensity (WACI) measures a portfolio's exposure to carbon-intensive companies by weighting each holding's Scope 1 and Scope 2 emissions per million of revenue by its share of portfolio value.

Climate-related transition risk

Climate-related transition risk is the financial risk that policy, legal, technology, market, or reputation changes create as economies move towards lower greenhouse gas emissions.

Sources

Last verified 2026-08-21

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Climate Transition Benchmark (CTB) Definition | Keslio