Translating targets into temperature: CDP launches new ratings system for climate crisis

CDP has today (7 July) launched a new set of ratings gauging the temperature pathway of investment portfolios, funds and stock indices in order to outline future climate-related risks to investors.

Currently, climate action is consistent with limiting warming to 3.2°C by the end of the century

Currently, climate action is consistent with limiting warming to 3.2°C by the end of the century

The CDP temperature ratings dataset will offer insight on more than 4,000 global companies, based on the perceived climate risks of their emissions reduction strategies covering all three scopes across the value chain.

The temperature ratings are part of continued work between CDP and WWF that will attempt to translate what corporate emissions strategies mean in alignment with perceived global temperature increases. Specifically, the ratings will reflect the global warming that is likely to occur if global emissions are reduced at a scale based on a company’s emissions reduction ambitions.

CDP’s global director of Emily Kreps, Global Director Capital Markets at CDP, said: “Climate science tells us that we must rapidly decarbonize and achieve net-zero GHG emissions by 2050 to avoid the most dangerous effects from climate change. Needing to play their part and drive an economy-wide transition, investors increasingly want to align their portfolios with international climate goals and the economy of the future.

“By providing a clear, science-based and uniform standard for companies’ ambition, CDP temperature ratings now allow investors to do that by benchmarking, communicating and reducing the temperature of their portfolios and products. Asset managers must be transparent, and it is good to see Europe’s largest asset manager leading the way”.

Europe’s largest asset manager Amundi is already trialling the new temperature ratings to inform its own ESG research and will measure the potential impacts across four global multisector equity funds. Amundi hopes the system will improve the ability to assess future risks and to identify areas of action and to encourage more organisations to set ambitious science-based targets.

In December, a report from the Science Based Targets initiative (SBTi) revealed that 285 businesses have now set emissions aims in line with the Paris Agreement. The body estimates that the actions of these companies will spur more than $18bn in climate-mitigation investment and up to 90TWh of annual renewable electricity generation.

However, there is an urgent need to limit global temperature increases to no more than 1.5C to avert the worse impacts of climate change. Currently, climate action is consistent with limiting warming to 3.2°C by the end of the century.

CDP will use the new system to improve the data that is provided to investors. New research also published this week has found that disclosure on climate-related data remains low. A survey of more than 500 businesses revealed that while three-quarters are concerned about climate-related risks, just one in ten consider measuring and disclosing their climate-related risks a priority.

More broadly, a 2020 study from CDSB found that 78% of European corporates are failing to report climate-related risks to the degree expected by their key investors.


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edie is launching its first bespoke sustainability conference focused on green finance, due to take place on 7-8 September 2020.

The two-day conference will see experts from the likes of  ING, BlackRock and BNP Paribas discuss the green recovery, covering topics such as green bonds, divestment and risk disclosure. 

For more information about the conference or to register as a delegate or sponsor,  visit https://event.edie.net/investor/

 Matt Mace



Tags

| Data | green finance | investors | net-zero | Science-Based Targets

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Climate change


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