Carbon Rating Framework Phase 2

The Carbon Rating Framework, developed by the Climate Policy Initiative (CPI), aims to integrate emissions performance into financial decision-making by assigning companies a rating from CR1 (lowest emissions) to CR10 (highest emissions). Phase 2 involved testing this framework on a sample of 50 companies, using a weighted average of current emission intensity (70%) and projected intensity (30%) normalized by revenue. The testing demonstrated the framework's ability to differentiate emissions across diverse sectors, though it highlighted limitations regarding the availability of projected emissions data and the volatility of revenue as a normalization metric. Future directions include integrating Scope 3 emissions, aligning with India's Nationally Determined Contributions (NDC), and utilizing sector-specific intensity metrics.

• The Carbon Rating (CR) Framework uses a 10-point ordinal scale (CR1–CR10) to benchmark companies based on the ratio of Scope 1 and Scope 2 emissions to revenue, where CR1 represents the lowest emissions and CR10 the highest.
• The final rating is determined by a weighted average intensity, combining current emission intensity (weighted at 70%) and projected emission intensity (weighted at 30%).
• In the sample test of 50 companies, the distribution of ratings spanned the entire scale, with CR10 being the most frequent rating, accounting for 25% of the sample.
• The framework effectively differentiated emissions by sector; for example, Materials were predominantly CR10 (9 out of 11 entities), while Consumer Staples generally showed lower emissions falling within CR1, CR4, and CR6.
• Sub-sector analysis showed the framework can capture granular differences, such as identifying that Steel falls within CR9–CR10 while Automobile Manufacturers fall within CR3–CR5.
• A significant limitation is the lack of available projected GHG emissions data, forcing the framework to rely on qualitative assessments of 19 factors to estimate future intensity.

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} }