Applying Corporate Transition Assessment to Indian steel

Corporate Transition Assessments (CTA) provide financiers with a framework to assess transition readiness

As climate shocks intensify across economies, bankers have a dual role to play: managing climate risks in their portfolios while providing capital for new investments that can help build a low-carbon future. This has led to a pivot away from high level net zero commitments towards identifying what transition means at a granular level for different companies in their sectors. Corporate Transition Assessments (CTA) provide financiers with a framework to assess this readiness.

What distinguishes a CTA from other frameworks is its emphasis on using asset level data – for instance looking at the production and emissions data of different plants – rather than overall corporate-level data to build a forward-looking view of the company’s emissions trajectory. CTAs also focus on the policy, market and technology dependencies that are associated with different decarbonisation levers which can help bankers assess not only a company’s stated ambition, but the feasibility of its transition pathway.

Using a leading Indian steel producer to demonstrate the application of Corporate Transition Assessment

In this piece, we demonstrate the application of the CTA to a leading Indian steel producer to highlight the kinds of insights generated and discuss best practices for conducting CTAs. The steel sector has multiple technology choices, long asset life, heavy capital requirements and dependencies outside the company’s control to reduce emissions. Thus, corporate level data alone would not provide a complete picture for the banker to evaluate.

Our assessment is not a judgment on the company. It is purely to demonstrate the application of CTA. We recognise this company is a leader in the Indian landscape and has set ambitious goals that can serve as an example for other companies to follow. Our analysis aims to demonstrate how the CTA framework is applied based on publicly available data. All company details are anonymised in both the report and this article.

We relied primarily on company disclosures — annual reports, investor presentations, sustainability reports, and press releases. For asset-level details on production capacity and technology type, we also relied on environmental clearances and the Global Energy Monitor’s Iron and Steel tracker, which captures data on every steel plant worldwide with production > 0.5 Mtpa.

In this article, we will focus on the first two pillars of the CTA: strategy and ambition, and feasibility. We have not deep-dived into accountability, given the breadth of guidance already available, either through the Indian Business and Sustainability Report (BRSR) or through third-party providers like London School of Economics (LSE) Transition Pathway Initiative.

Pillar one: strategy and ambition

Transition vulnerability

Process: We assessed the company's transition vulnerability in two steps. First, we built out the company's footprint, breaking down its production and revenue drivers and identifying the company’s current GHG emissions and production technology base across geographies and assets to identify the most financially and environmentally material parts of the company. We then used this to identify the most relevant policy, market and technology transition drivers and examine their potential impacts.

Insights: We saw that the company is exposed to limited immediate transition pressures. A majority of its production and revenue came from India, where pressures and signals to decarbonise steel are present but do not impose a material burden in terms of either quantum or urgency. The only real transition pressure came from the EU, which accounted for a <10% revenue share for the company through exports. The EU Carbon Border Adjustment Mechanism (CBAM) could raise the landed cost of emissions-intensive Indian steel exports by ~30%. Our mapping of the company’s assets showed that its production was heavily reliant on the emissions-intensive Blast Furnace–Basic Oxygen Furnace (BF-BOF) route, which is challenging to decarbonise, making the EU CBAM a clear transition risk. However, a key plant had the right technology mix to adopt the lower emission Natural Gas/Green Hydrogen Direct Reduced Iron – Electric Arc Furnace (Natgas/GH2 DRI-EAF), as well as the right location to serve the EU market. The company had already laid out a plan to build the plant’s capacity to meet EU CBAM requirements, acting as a strong mitigant.

Takeaway for bankers: domestic banks aligned with India’s net-zero 2070 target, it indicates that the company’s efforts are closely coordinated. It implies that significant decarbonisation efforts by the company could enhance its competitive position as the sector transitions in India and will likely align with the bank’s own timelines. This is key for risk management teams, as it signals that the client has limited exposure to transition risk at the outset. However, for most foreign banks that have set net-zero portfolio targets by 2050, it signals a need to pay closer attention to the company's decarbonisation efforts to align with bank priorities.

Client strategy assessment

Process: The company had voluntarily developed and disclosed a climate transition plan, which provided a starting point for understanding its overarching vision. We did so by applying three lenses: i) We first assessed the scope of the company’s plans to see if they were covering a majority of their current emissions, and current and future assets. ii) We then assessed the granularity of the company’s plan to see if there were clear decarbonisation levers, interim milestones and targets and discussions on operational and financial needs and dependencies. iii) Finally, we looked at the ambition of the company to assess alignment with both domestic and international benchmarks.

Insights: We observed that the company was ambitious and a market leader, but a deeper analysis was needed of its transition plan’s scope and the detail of its actions. The decision to voluntarily develop and disclose a transition plan, coupled with its pledge to achieve net-zero emissions by 2050, demonstrated the company’s market leadership ambition. The company’s decarbonisation target is aligned with similar domestic and international benchmarks, including TERI’s 2070 net zero trajectory and TPI’s 2-degree scenarios. Its status as a major steel producer also meant that this decision would speed up the transformation of other parts of the related value chain.

However, we identified two areas that required deeper engagement with the company. The first was that the net-zero target applied only to the company’s three largest existing facilities and did not appear to account for its considerable expansion plans. If all planned expansions come to fruition by 2050, the target would apply to only ~20% of total production.

Figure: operational capacity and announced capacity expansion plans by company X’s steel production plants. When targets were set in 2021 they accounted for 100% of all production; however today these cover only 85% of the company’s production capacity, and by 2050 will cover only 22% of projected production capacity should all announced plans be built.

This represents a material transition risk and highlights the need for further engagement to understand whether and how the company plans to address it. The second was that the company had clear levers and targets through 2030, focused on low-hanging fruit such as energy efficiency and RE integration. Still, the journey from 2030 to 2050, which required the steepest emissions-intensity decline, provided limited details on the use of green hydrogen, electrifying steel production, and the use of CCUS and offsets to reduce emissions intensity. Likely, the company is still evaluating long-term options and identifying how these technologies mature over time.

Takeaway for bankers: The deployment of CCUS and the use of carbon offset levers are essential, as they will play a key role in executing the company’s decarbonisation strategy in the long run. Thus, an immediate action area for bankers is to maintain ongoing engagement with the corporate to identify their plans, monitor their investments, and track market dependencies to determine which decarbonisation pathway they will choose and the risks/opportunities that imply for the bank. Another crucial aspect for bankers to monitor is the extent to which the company's target covers its assets. It is essential that the decarbonisation goals encompass most, if not all, of the company's assets and are not restricted to only existing plants or a small portion of production.

Pillar two: feasibility

Investment alignment

Process: Given the range of research available on the company’s financial position, along with the bank’s own analysis, we focused our assessment on the company’s investment pipeline. This forward-looking assessment helps a bank understand which decarbonisation pathway the company is likely to follow, what dependencies this would create, and how that may manifest as a risk or opportunity to the bank. 

Insight: We saw plans to produce green steel, expansion plans for BF-BOF production, and a large share of planned capacity with no clear green steel alignment or decarbonisation pathway. Examining this planned capacity, we saw that the company would always have significant BF–BOF production capacity, even if all new plants were to transition to the lower-emission Natgas/GH2 DRI EAF route or the Scrap-EAF route. Thus, the company’s ability to achieve net zero will require breakthroughs in technologies such as CCUS to decarbonise BF-BOF plants.

Figure: planned new capacity by plant and steelmaking route by 2050. Based on public information, 40% of projected production capacity has limited or no information about its planned technology route or emissions intensity.

Takeaway for bankers: For banks, this is an opportunity to engage the client to better understand their expansion plans and surface opportunities to support the transition. This signals the importance of tracking plant development to ensure alignment with net-zero goals. It also highlights the need to better understand the factors influencing whether the company can decarbonise its BF–BOF production routes and meet its net-zero targets. Deviation from committed net-zero targets may expose the bank to reputational risk if financing decisions rely on the company’s transition plan, and may also weaken the company’s creditworthiness if carbon pricing regimes lead to higher-than-projected carbon costs.

Dependency mapping

Process: We conducted a deep dive into every decarbonisation lever available to the company, drawing on the interventions outlined in the Ministry of Steel’s Green Steel Action Plan. For each lever, we identified its emissions abatement potential, its relevance to the company, the techno-economic feasibility of the lever — typically at a regional level, and the timelines within which key decarbonisation levers like Green Hydrogen and CCUS may materialise.

Insight: We found that the company is well-positioned to capture near-term decarbonisation opportunities. Energy efficiency measures are already underway, and renewable energy capacity is scaling, potentially meeting more than 40% of electricity needs by 2030. Structural constraints emerge in the long term, however. The company’s continued investment in BF–BOF capacity limits its ability to utilise scrap and constrains future green hydrogen integration. A transition to DRI–EAF routes would unlock those pathways for the company, though additional constraints must be considered. For example, GH₂ integration depends heavily on the cost of hydrogen falling sharply — an outcome that is unlikely by 2050, the year in which the company has committed to achieving net zero. CCUS is therefore likely to be the prioritised decarbonisation pathway. Still, it also faces significant feasibility challenges: storage is unlikely to be commercially viable before 2035, key plants lack access to potential storage sites, and costs remain prohibitive. That said, several pilots are underway in India, many of which are led by the Department of Science & Technology, in partnership with industry.

Takeaway for bankers: Mapping dependencies is important for rooting the CTA in reality. Companies are constrained by techno-economic realities, which must be monitored and addressed. For banks, these dependencies surface both risks and opportunities. A chance to support the company in leveraging levers, and the risk of compounding transition risk should policy and market signals outpace commercial and technical feasibility.

Conclusion: Corporate Transition Assessment as a comprehensive narrative of company transition

This article shows that a CTA pulls together a cohesive narrative of the company from a transition perspective. The following table highlights our hypothesis of how a CTA can support different functions of a bank.

Figure: the value of CTAs to different bank functions.

We have not used the CTA to conduct a detailed financial analysis of the company, given the uncertainty and subjectivity involved in modelling transition risks. In our opinion, this is best left to the banks themselves, who have their own internal processes, guardrails and thresholds. We believe that insights from the CTA can complement and inform the existing sectoral and client-level analyses already being conducted by banks and can inform both sectoral and client engagement strategies. For instance, a bank may choose to enable financing only for existing plants below a certain emissions threshold or with a clear decarbonisation plan; it may only finance new plants that utilise the Natgas DRI-EAF or Scrap-EAF routes; or focus efforts on financing players in the value chain to improve the availability of inputs like scrap. At a client level, it may choose to act as a thought partner and co-create and finance a company’s transition plan.

Read the full report

Our full report provides a more detailed framework and process breakdown, as well as a section discussing steel sector dynamics, transition levers, and dependencies. Banks can use these to design and inform their own CTAs for clients in the steel sector.

An Introduction to Corporate Transition Assessments in India

Read our other blogs on Corporate Transition Assessment

This is the final edition of a three-part blog series. This piece outlines a case study of a steel company to understand how the CTA framework can be used by financiers. In the first two parts of this series, we explained why Indian banks should conduct CTAs, and broke down the methodology and framework.

Introducing Corporate Transition Assessments in the Banking Sector

A Guide to Conducting Corporate Transition Assessments

Authors

Akshima Ghate

Akshima Tejas Ghate is the Managing Director of Rocky Mountain Institute’s India Program, where she leads strategy, research, and partnerships to accelerate India’s clean energy transition.

Riya Saxena

Riya Saxena is a Manager at Rocky Mountain Institute India, where she leads work with India’s banking sector to accelerate public and private capital flows towards the country’s climate transition.