Institutional investors are increasingly focused on distinguishing credible transition strategies from high-level ambition. In this Q&A, we speak with Alicia White, Director of Climate and Nature Solutions, about how investors are using climate data today, the challenges they face around disclosure and scenario analysis, and the tools needed to assess transition readiness, manage risk, and support effective stewardship in a rapidly evolving regulatory and market landscape.
Sustainalytics: Thanks for joining us today, Alicia. To start, could you tell us a bit about your role at Morningstar Sustainalytics?
Alicia White: Thank you. I’m Director of Climate and Nature Solutions at Morningstar Sustainalytics, and I'm responsible for our climate and nature data products, covering carbon emissions, physical risk, transition risk, and natural capital and biodiversity. Essentially, I help to ensure that what we build is useful to our clients, and that it meets their needs as they incorporate climate and nature considerations into their investment process.
On Corporate Climate Commitments and Data
SUST: Great, thank you. So, as climate considerations become increasingly embedded in global investment practices, how would you describe the overall state of climate data usage among institutional investors today?
AW: Climate really continues to be a key material risk and opportunity for institutional investors, who are continuing to get more sophisticated in how they integrate climate considerations into their workflows.
We really see this in the data as well. According to our 2025 Voice of the Asset Owner survey, which captured responses from over 500 asset owners, representing over USD 19 trillion USD in assets under management, climate transition readiness has ranked as the most material environmental issue for multiple years running.
This tells us that climate is certainly no longer a niche practice. It is mainstream, and the tools that investors need to operate at this level have also evolved accordingly.
SUST: With companies issuing a growing number of climate commitments and transition targets, what kind of information do investors need to confidently distinguish between credible action and surface-level ambition? And why is it important for investors to dig deeper when assessing climate commitments?
AW: As you said, we're seeing a growing number of climate commitments and transition targets. Some of our recent analysis shows that across the global Morningstar TME Index, over 70% of those index constituents have disclosed some kind of decarbonization plan. However, less than 40% of those have a net zero aligned target, and even less than 25% have disclosed an interim net zero target.
We're seeing a lot of information and disclosure talking about decarbonization, but disclosure is not the same as action. The critical capability for investors is to assess how well a company's ambitions around climate actually matches with their action. Investors must examine not only stated commitments, but measurable actions. This includes green capital expenditure as a proportion of total investment, revenue alignment with low carbon activities, and the trajectory of a company’s actual emissions versus their stated emissions reduction targets.
The Voice of the Asset Owner survey confirms that 36% of asset owners are already assessing portfolio company leadership and action as a transition readiness measure. Sustainalytics' Climate Transition Toolkit is designed to help make that assessment both rigorous and scalable.
On Investors' Data Focus and Challenges
SUST: Today, we know that investors are using climate data to pursue a range of sustainability objectives, from supporting the low-carbon transition to aligning with climate-related sustainable development goals (SDGs). What factors might lead an investor to prioritize a transition-focused investment approach over one that's centered on SDG alignment?
AW: So, these aren't necessarily mutually exclusive frameworks, but they serve very different investment objectives. For many institutional investors, transition may take precedence. We know that the risks associated with a disorderly transition – having stranded assets, policy shocks, and technology disruptions – have clear and, in many cases, measurable paths, into portfolio returns.
Nonetheless, the frameworks of the SDGs and the concept of climate transition are converging. The climate SDGs intersect very closely with transition themes, and we also see the intersection of the climate and nature nexus with both transition-focused themes.
Asset owners have identified physical climate risks as the third most selected environmental concern in 2025’s Voice of the Asset Owner survey, and this really highlights the need to understand and connect these two themes of sustainable development, as well as transition, with each other. The Climate Transition Toolkit enables investors to do both of those, whether they're looking at their transition-focused themes within the Low Carbon Transition Rating, as well as some of the more biodiversity-focused themes, within the Nature Data package.
SUST: Despite progress in disclosure standards, investors are still encountering fragmented or incomplete climate data sets, particularly around scope 3 emissions, smaller issuers, and emerging markets. What challenges does this create for investment decision making, and what solutions are there to support investors?
AW: Data gaps are one of the most cited practical barriers to integrating climate data at scale. Forty-four percent of asset owners in the Voice of the Asset Owner survey cited a lack of standardized data as a top three barrier. Thirty-three percent cited difficulty in reporting.
Scope 3 can be a particularly challenging metric. For many companies, it represents the majority of their total emissions, but consistent, comparable reported data remains sparse, given the challenges that companies face actually calculating their scope 3 emissions. This is particularly true for smaller issuers, as well as those in emerging markets, where the challenges around supply chain traceability and carbon accounting can compound in their difficulty.
The Carbon Emissions Time Series data that we have within our Climate Transition Toolkit can address this directly. We capture both granular scope 3 category-level reported data and provide estimates for scope 3 across 16,000 companies. This enables investors to access comparable data across investments, regardless of the reporting status of the company.
Our upcoming Partnership for Carbon Accounting Financials-aligned quality score will support investors in providing more transparency in reporting this data.
On Tools and Approaches to Support Climate-Focused Investment Strategies
SUST: So as investors move beyond basic emissions metrics, scenario analysis has become even more important, but also more complex. What types of tools or methodologies can help investors evaluate transition risk and understand portfolio resilience under different climate pathways?
AW: Indeed, scenario analysis has become a cornerstone of climate risk assessment and climate risk disclosures. But the challenge really exists between operationalizing that climate scenario assessment and reporting it.
We know that investors are moving away from so-called paper decarbonization, or simply reducing their financed emissions within their portfolio, towards supporting real-world emissions reduction. This is relevant to scenario analysis because as investors are looking to drive real change and transition outcomes, it's even more important to understand the range of possible scenarios that their portfolios could experience and contribute to.
The starting point for credible scenario analysis is using internally consistent pathways that reflect a real range of possible outcomes. This includes scenarios across orderly, disorderly, and hothouse world outcomes, and applying those to companies and portfolios across a variety of time horizons.
Within our Climate Transition Toolkit, we provide two key signals that can help and support the scenario analysis: Implied Temperature Rise and Ambition Temperature Alignment. These signals translate company-level emissions trajectories into temperature alignment scores that can be compared to company-specific budgets based on four different climate change scenarios. Additionally, the Value at Risk signal can provide additional insight into how a company's alignment against each of those different world scenarios might translate into monetary terms.
This level of detailed analysis can enable investors to compare where a company is heading against possible scenarios of where a company could head under different macroeconomic outcomes. It can also help identify how that compares to the company's stated ambitions, and how that aggregates up to the portfolio level to identify where that portfolio is heading.
SUST: We see that expectations are rising around engagement and climate-aligned reporting. What kinds of data and insights best support investors in shaping targeted stewardship strategies and meeting evolving regulatory disclosure requirements?
AW: Effective stewardship really starts with identifying where engagement will have the most impact. One example of this is within our own Net Zero Transition Stewardship Program, which draws directly on data from our Climate Transition Toolkit. This is purpose-built to support investors in addressing company approaches to low carbon alignment across multiple different dimensions. It leverages data and insights from the Climate Transition Toolkit to identify how a company's performance against best practices compares to its peers, and where that company can improve.
The most sophisticated investors are treating both stewardship and reporting as a continuous feedback loop; engagement outcomes flow back into portfolio analytics, which can help update their transition scores, and then inform the next round of engagement priorities.
We also see the Net Zero Investor Investment Framework (NZIF) 2.0 as being a key framework that investors are using to support their engagement activities. By using this framework to identify which areas and criteria companies are performing well on, or where they need improvement, investors can leverage the NZIF Data Solution within our toolkit to evaluate companies against this framework, and set engagement targets that can also fit very nicely with portfolio alignment targets, for example, to build a strategy for a portfolio that aligns with those key regulatory frameworks.
SUST: Excellent. Well, thank you so much, Alicia, for explaining both the challenges facing investors, as well as the potential solutions. We appreciate your insights into how investors can utilize climate data and Sustainalytics’ Climate Transition Toolkit to evaluate transition risk and distinguish credible action from surface-level ambition.
