Transition Planning and Avoided Emissions

Last Updated: 2026-06-15

A transition plan sets out how an organization will move toward a low-carbon future: the targets it commits to, the actions it will take, and how it will track progress. For financial institutions, that plan is becoming a standardized artifact rather than a narrative document. This page explains what a credible transition plan requires, why avoided-emissions analysis is a core component of one, and how Koi supplies the evidence these plans depend on.

What a transition plan now requires

In June 2026, the International Organization for Standardization published ISO 32212, Sustainable finance — Net zero transition planning for financial institutions. It is the first international standard dedicated to how the financial sector plans its own transition. It covers banks, insurers, asset owners, asset managers, and other capital-market participants across their lending, investment, insurance, and engagement activities.

The standard spans the full planning cycle: assessing current climate-related impacts and risks; developing transition objectives and targets; integrating those targets into financing decisions; communicating outcomes; and reviewing performance. Two features shape everything that follows. First, it is explicitly forward-looking: institutions are expected to integrate transition objectives informed by forward-looking climate assessment. Second, it grounds the institution's purpose in the real economy. As ISO puts it, "financial institutions have an important role to play in advancing the goals of the Paris Agreement."

Where avoided emissions fit a transition plan

The standard asks institutions to assess credible transition strategies and direct capital toward them. As Daan van der Wekken, Head of Sustainability at BSI, framed it: "The transition across the real economy depends on financial institutions being able to assess credible transition strategies and direct capital towards them."

That is a quantitative problem before it is a reporting one. It requires a defensible answer to how much real-world emissions impact a given financed solution is expected to deliver. This is precisely what avoided-emissions analysis produces: a transparent, baseline-driven estimate of the emissions a solution avoids relative to the scenario in which it is not deployed.

A transition plan that tracks only financed-emissions reduction describes how an institution manages its own climate risk. A plan that also quantifies the climate-solution capital moving through it describes its contribution to the transition itself. Avoided emissions is the metric that makes the second half legible. It is credible because it rests on transparent baselines, auditable because the assumptions behind it are explicit and reproducible, and rigorous because it resolves to specific interventions rather than portfolio averages.

Reported alongside financed-emissions reduction, not netted against it

A credible net-zero strategy runs two parallel targets. The first reduces financed emissions on an absolute basis against a 1.5°C pathway. The second grows capital exposure to climate solutions, with avoided emissions as one impact metric for that allocation. A transition plan needs both.

The two stay in separate ledgers. Avoided emissions and forward-looking metrics inform the climate-solutions side of the plan, but they do not offset financed emissions and do not substantiate the net-zero claim itself. Netting one against the other would allow a portfolio to report progress while continuing to finance substantial real-economy emissions. For how the metrics are defined under PCAF and the GHG Protocol, see Financed Emissions and Avoided Emissions.

What Koi provides for transition planning

Koi quantifies the avoided-emissions and climate-solutions side of a transition plan using transparent baselines and auditable assumptions. Because Koi treats avoided emissions as either backward-looking or forward-looking depending on whether they are realized or anticipated, its analysis maps directly onto the forward-looking metrics a transition plan reports. This includes the Expected Emissions Reductions framing used in transition finance. Estimates resolve to specific climate-solution classifications and to portfolio composition, not just a single portfolio-level number.

This is the evidence base that lets an institution demonstrate capital is flowing to credible transition strategies. Asset owners and asset managers report these climate-solution allocations alongside their financed-emissions inventory, giving a transition plan both halves of the picture it needs. As transition-planning standards continue to formalize, the consequential, baseline-driven analysis Koi already produces is the analysis these plans will increasingly require.