Carbon Rating Framework Phase 2

This technical brief describes Phase 2 of the Carbon Rating Framework developed by the Climate Policy Initiative (CPI). The framework aims to integrate emissions performance into financial decision-making by assigning a carbon rating (CR1–CR10) based on a company's emissions intensity relative to its revenue. Phase 2 involved testing the framework on a sample of 50 companies to validate its feasibility and ability to differentiate emissions performance across various sectors.

• The Carbon Rating Framework uses a performance-based approach to evaluate companies on emissions intensity (Scope 1 and Scope 2) normalized by revenue, rather than using simple 'green' or 'brown' taxonomies. It employs a 10-point ordinal scale (CR1–CR10), where CR1 represents the lowest emissions and CR10 the highest.
• The final carbon rating is determined by a weighted average of current emission intensity (weighted at 70%) and projected emission intensity (weighted at 30%). Projected intensity is derived from 19 qualitative factors, such as emission-reduction policies and management commitment, which are translated into estimated percentage reductions over a three-year horizon.
• The rating scale was calibrated using a dataset of 750 listed companies disclosing emissions under BRSR norms for FY24. The resulting thresholds range from a lower limit of 0.01 TCO2e/Cr. INR for CR1 to an upper limit of 5249.33 TCO2e/Cr. INR for CR10.
• Sample testing across 50 companies showed that the framework can effectively differentiate emissions both between and within sectors. For example, Materials companies were predominantly rated CR10 (9 out of 11 entities), while Consumer Staples generally showed lower emissions, falling within CR1, CR4, and CR6.
• Sub-sector analysis demonstrated the framework's sensitivity to granular differences; for instance, Real Estate Development spanned CR2, CR4, and CR10, while Cement was uniformly rated at CR10.
• The framework faces several limitations, including a reliance on qualitative assessments for projected emissions due to a lack of shared corporate GHG projections and the risk that sector-wide shifts could change a company's ordinal rating even if its own emissions remain constant.

APA

Khanna, N., Gada, K., & Tandon, G. (2025). Carbon Rating Framework Phase 2. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/11/Carbon-Rating-Framework-Phase-2.pdf

Chicago

Khanna, Neha, Kalpesh Gada, and Gauri Tandon. Carbon Rating Framework Phase 2. Climate Policy Initiative, 2025. https://www.climatepolicyinitiative.org/wp-content/uploads/2025/11/Carbon-Rating-Framework-Phase-2.pdf.

Wikipedia

{{cite report |last1=Khanna |first1=Neha |last2=Gada |first2=Kalpesh |last3=Tandon |first3=Gauri |title=Carbon Rating Framework Phase 2 |publisher=Climate Policy Initiative |date=November 2025 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2025/11/Carbon-Rating-Framework-Phase-2.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{khanna2025carbon, author = {Khanna, Neha and Gada, Kalpesh and Tandon, Gauri}, title = {{Carbon Rating Framework Phase 2}}, institution = {Climate Policy Initiative}, year = {2025}, month = nov, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2025/11/Carbon-Rating-Framework-Phase-2.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }