The urgent issue of climate change has led to companies increasingly taking climate action by setting science-based emission reduction targets aligned with the goals of the Paris Agreement. The purpose of this study was to investigate how Swedish companies are working to reduce their greenhouse gas emissions through science-based targets. The study was performed through a survey to the Swedish companies committed to the Science Based Targets initiative, and by an assessment of progress against targets using public emission data. The results showed that science-based targets as a tool for climate action raises the climate ambition of companies and provides a good basis for climate strategy. Benefits of committing to science-based targets were primarily that it builds credibility and a good reputation. The main drivers were to improve company climate action, reduce greenhouse gas emissions as well as to gain market advantages. Most companies reported climate results annually, but reporting practices were often insufficient or lacked transparency. Most science-based targets were on track to be achieved, though the results showed more limited progress against targets covering scope 3 emissions. The key activities for progress were primarily linked to energy, transportation and fuel, and product development. Overall, the study shows that science-based targets can play a significant role in companies’ efforts to reduce greenhouse gas emissions and serve as a useful climate action tool. However, increased transparency is needed to strengthen the integrity of the targets.

We are currently experiencing a climate crisis. The planet’s temperature is rising considerably due to the emission of greenhouse gases generated by human activities. This situation poses a challenge for everyone, including companies. Private sector actors are taking actions to mitigate the consequences of climate change, such as global warming. Some of these measures are imposed by national regulations, and others are motivated by the firms' own will. The latter include Science Based Target initiative (SBTi), a voluntary initiative that supports companies in setting climate targets to reduce emissions in line with climate science and the Paris Agreement. The number of companies taking action through participation in it is growing. However, SBTis a young initiative that should be further explored, as more research is needed on its effects. This master’s thesis responds to this gap by studying the impact of joining the SBTi on the financial performance of companies measured through stock returns, volatility and financial risk. For this purpose, the Difference-in-Differences (DiD) statistical technique has been applied through a linear regression model to a sample of 4869 companies. It includes both SBTi member and non-members. At the same time, this research also addresses a second objective, to estimate the determinants to join SBTi, since this is a voluntary action, through a Probit model. It has been found that there is a negative relationship when the financial variable is stock return. While when volatility and financial risk are measured, there is no statistically significant effect. These findings show that being a member of SBTi could reduce investor returns, but does not influence the other two financial indicators. This suggests that investors are not attracted to these companies and may indicate that they see the initiative as a costly distraction. Also, as investors manage their portfolios to reduce market downturns, investing in firms that are part of the initiative will not be something they will consider in terms of their votality. Although the initiative's objectives and commitments help to mitigate climate risks by encouraging the reduction of carbon dioxide emissions, they do not generate significant impacts on the level of financial risk, according to the observations. Regarding the results on the likelihood of joining SBTi, it was found that companies that produce lower returns to investors, have lower stock price fluctuations, have higher financial risk and pollute less, are more likely to be members. This suggests that the initiative should drive its efforts towards companies with these characteristics. This study is innovative in its field in that it addresses a topic of current interest but that has been little explored, the SBTi. It applies two methodologies, regression analysis through DiD and Probit model, but with global panel data, which makes it more challenging. This master’s thesis contributes to the research community in three ways. First, it fills a gap providing new insights into SBTi from a financial perspective. Second, it informs the initiative itself of the implications of its activity and makes it easier to identify potential members and attract them. Third, it can be useful for investors who want to be part of the fight against climate change and include these companies in their portfolios, but want to know the financial consequences of doing so. / Vi upplever för närvarande en klimatkris. Planetens temperatur stiger avsevärt på grund av utsläppen av växthusgaser som genereras av mänsklig verksamhet. Denna situation utgör en utmaning för alla, inklusive företag. Privata aktörer vidtar åtgärder för att mildra konsekvenserna av klimatförändringar, såsom global uppvärmning. Vissa av dessa åtgärder föreskrivs av nationella regleringar, medan andra motiveras av företagens egna vilja. Det senare inkluderar SBTi, en frivillig initiativ som stödjer företag i att fastställa klimatmål för att minska utsläppen i linje med klimatvetenskapen och Parisavtalet. Antalet företag som vidtar åtgärder genom deltagande i initiativet ökar. Dock är SBTi en ung initiativ som bör undersökas mer, eftersom merforskning behövs om dess effek. Denna avhandling fyller detta gap genom att studera effekten av att delta i SBTi på företagens finansiella prestationer, mätt genom aktieavkastning, volatilitet och finansiell risk. För detta ändamål har den statistiska tekniken DiD tillämpats genom en linjär regressionsmodell på ett urval av 4869 företag. Det omfattar både medlemmar och icke-medlemmar av SBTi. Samtidigt behandlar denna forskning även ett andra mål, att uppskatta faktorer som påverkar beslutet att delta i SBTi, eftersom detta är en frivillig åtgärd, genom en Probit-modell. Det har konstaterats att det finns ett negativt samband när den finansiella variabeln är aktieavkastning. När volatilitet och finansiell risk mäts finns det däremot ingen statistiskt signifikant effekt. Dessa resultat visar att att vara medlem i SBTi kan minska avkastningen för investerare, men påverkar inte de andra två finansiella indikatorerna. Detta tyder på att investerare inte lockas av dessa företag och kan indikera att de ser initiativet som en kostsam distraktion. Dessutom, eftersom investerare hanterar sina portföljer för att minska marknadsnedgångar, kommer investeringar i företag som är en del av initiativet inte vara något de överväger med avseende på volatilitet. Även om initiativets mål och åtaganden bidrar till att mildra klimatrisker genom att främja minskning av koldioxidutsläppen, genererar de inte signifikanta effekter på finansiell risknivå enligt observationerna. Vad gäller resultaten angående sannolikheten att delta i SBTi, visade det sig att företag som ger lägre avkastning till investerare, har lägre aktieprisfluktuationer, har högre finansiell risk och förorenar mindre, har större sannolikhet att vara medlemmar. Detta tyder på att initiativet bör rikta sina ansträngningar mot företag med dessa egenskaper. Denna studie är nyskapande inom sitt område genom att den behandlar ett ämne av aktuellt intresse men som är relativt outforskat, nämligen SBTi. Den tillämpar två metoder, regressionsanalys med DiD och en Probit-modell, men med globala paneldata, vilket gör det mer utmanande. Denna avhandling bidrar till forskarsamhället på tre sätt. För det första fyller den en lucka genom att ge nya insikter om SBTi ur ett finansiellt perspektiv. För det andra informerar den själva initiativet om konsekvenserna av dess verksamhet och underlättar identifieringen av potentiella medlemmar och att locka dem. För det tredje kan den vara användbar för investerare som vill vara en del av kampen mot klimatförändringar och inkludera dessa företag i sina portföljer, men som vill känna till de finansiella konsekvenserna av att göra det.

As CO2 emissions increase, so does the average temperature, leading toenvironmental consequences such as rising sea levels, drought, and starvation.Therefore, it is essential to act towards the reduction of the CO2 emissionsto counteract these dire consequences. The Science Based Target initiative(SBTi) which is a non-governmental organization has created a framework fororganisations to set net-zero targets for 2050. The goals are accompanied byguidelines, demands and recommendations for how to measure and reportemissions across a supply chain. There are challenges and problems attached to measuring CO2 emissions formultinational companies (MNC). The emissions are divided into three scopes.Scope 3 which consists of indirect emissions coming from up- anddownstream of the focal companies has proven to be challenging to gatherdata for due to lack of proper company capabilities. This thesis aims toidentify challenges related to measuring and reporting the emissions caused bythe use of sold products, which is one of the 15 categories of Scope 3.Moreover, this study aims to create a standardized framework for MNCs byaddressing the necessary steps for collecting data for developing an emissionscalculation tool and to suggest how to properly calculate and illustrateemissions ty the focal company. Lastly, the implementability of the frameworkwill be assessed. The research methods include a case study with a set of unstructuredinterviews of nine participants. These includes engineers, innovationmanagers, sustainability managers and product managers. Moreover, aniterative process for developing a calculation tool was performed includingtesting of the tool as it was developed. The case study identified challenges of calculating emissions from soldproducts. These were of lack of IT infrastructure, insufficient data forcalculating emissions, high uncertainties of how the organization shouldconduct measuring of emissions and how to allocate resources in the SBTiimplementation. Moreover, the risks of interpreting calculated dataincorrectly were identified. Lastly, a framework was created consisting of aseven-step process including: communicating transition, assembling projectteams, covering emission, mapping data, creating the tool, task delegation andeducation and standardization.

In order for the aviation industry to meet the targets of the Paris agreement and reach net-zero by 2050, significant amounts of greenhouse-gas emissions are to be reduced. However, as the industry is essentially dependent on conventional jet fuel, it becomes necessary for alternative technologies to develop and phase out fossil-based fuels. The thesis aims to provide valuable insights into the challenges and potentials of alternative technologies, which include sustainable aviation fuel (SAF), hydrogen, and electric-powered aviation. Additionally, the thesis investigated the Science-Based Targets initiative, and challenged the interim 1.5oC aviation pathway. The findings emphasize the crucial role of stakeholder cooperation in achieving net-zero emissions by 2050. Moreover, the thesis underscores the need for significant investments in alternative technologies, in order to enable growth and make the solutions increasingly attractive compared to conventional jet fuel. Collaboration and innovation are essential for attaining environmental targets while balancing economic growth. The thesis also highlights the urgency of policies and regulations to promote additional SAF production investments in order to vastly increase the supply. Furthermore, while the Science-Based Targets initiative (SBTi) is an effective means of securing airlines' commitment to the Paris Agreement, the thesis concludes that the SBTi 1.5oC interim pathway for airlines is overly optimistic. While the SBTi 1.5oC interim pathway’s SAF estimates for 2050 could be achieved, the thesis suggests around 2 to 4 times lower SAF supply for 2030 compared to the SBTi’s estimates. This further emphasizes the airlines' difficulties in following the 1.5oC pathway and the need for the industry to accelerate its transformation and make space for alternative solutions in order to meet the environmental targets. / För att flygindustrin ska nå målen i Parisavtalet och uppnå netto-nollutsläpp år 2050 måste betydande mängder växthusgasutsläpp minskas. Eftersom branschen är i grunden beroende av konventionellt flygbränsle blir det nödvändigt att utveckla alternativa teknologier för att fasas ut fossilbaserade bränslen. Avhandlingens syfte är att ge värdefulla insikter i utmaningarna samt möjligheterna med alternativa teknologier, vilket inkluderar hållbart flygbränsle (SAF), väte och elektriskt driven flygning. Dessutom undersökte avhandlingen Science-Based Targets-initiativet och utmanade det interimistiska 1.5°C-målet för flygindustrin. Resultaten betonar den avgörande rollen som samarbetande intressenter spelar för att uppnå netto-nollutsläpp år 2050. Dessutom understryker avhandlingen behovet av betydande investeringar i alternativa teknologier för att möjliggöra tillväxt och göra lösningarna allt mer attraktiva jämfört med konventionellt flygbränsle. Samarbetet och innovationen är nödvändiga för att uppnå miljömålen samtidigt som ekonomisk tillväxt möjliggörs. Avhandlingen betonar också brådskan med att införa policys och regleringar för att främja ytterligare produktion av hållbart flygbränsle (SAF) för att drastiskt öka tillgången. Medan Science-Based Targets-initiativet (SBTi) är ett effektivt sätt att säkerställa flygbolagens åtagande att uppfylla Parisavtalet, drar avhandlingen slutsatsen att SBTi:s interimistiska 1.5°C-mål för flygindustrin är alltför optimistiskt. Medan SBTi:s SAF-estimat för 2050 skulle kunna uppnås, föreslår avhandlingen en SAF-tillgång som är ungefär 2-4 gånger lägre för 2030 jämfört med SBTi:suppskattningar. Detta understryker ytterligare svårigheterna för flygbolag att hålla sig till 1.5oC målet samt nödvändigheten för flygindustrin att accelerera omställningen och skapa utrymme för alternativa lösningar för att uppnå miljömålen.