Stockholm (NordSIP) – Hot on the heels of its new report warning that global temperatures are on course to rise far faster than expected, potentially putting trillions of pounds in investors’ cash at risk, $520 billion fund house Schroders has launched a “dashboard” designed to giver investors a clearer understanding of complex climate-related investment risks.
Schroders’ analysis of the biggest drivers of climate change, including oil and gas production and political action, suggests global temperatures are poised to rise by 4 degrees above pre-Industrial levels, twice the level agreed by global leaders at the 2015 Paris Climate Accord, leaving the world “accelerating towards a cliff edge.”
The “Climate Progress Dashboard” accompanying Schroder’s findings explains trends marking progress (or lack thereof) towards a decarbonized world, providing “an objective and transparent view of change. It should help investors base decisions on the outcomes that are likely, rather than those they would like to see.”
“Climate change will be a defining driver of the global economy, society and financial markets over coming years, decades and beyond,” said Andrew Howard, Head of Sustainable Investment at Schroders, in a comment to the dashboard. “Whether the global economy is rebuilt less on carbon intensive foundations or the temperature continues to escalate, investors will be unable to avoid its impacts.”
The “disruptive impacts” of climate change will affect investments in at least two concurrent ways: besides influencing corporate valuations with impacts on cash earnings for global companies, the additional challenge for investors and businesses will be the shift to low-carbon and renewable technologies itself, which could leave them with “stranded assets.”
One of the main purposes of the Schroders dashboard, therefore, is to help investors keep track of which industries are shifting to low-carbon business models. It assesses 12 decarbonisation metrics, including political action, public concern, climate finance, corporate planning, renewables deployment and fossil fuel production. As no single parameter is a barometer of success, all competing parameters are measured concurrently, with some measuring aspiration while others gauge action.
From the Schroders dashboard announcement:
“Political ambition”, for example, captures the pledges governments have made to reduce carbon emissions. The dashboard points to a 2.8°C rise in temperatures based on current ambitions.
The dashboard also captures actual progress – the implementation of policies – under “political action”. Slower action here would lead to a 3.6°C rise in temperatures, underlining differences between headline statements and tangible action.
Least progress has been made on oil and gas production, which points to a rise of over 6°C, implying major changes will be needed to hit long term targets. Use of these fossil fuels will have to fall significantly in future, ultimately to zero.
Production of coal – typically cast as the villain of climate discussions – has already started falling, although not far enough to meet the two-degree target.
The full dashboard, designed for use by professional investors, also opens up to chart recent progress and scenarios of what it means for future trajectories of global warming.”
The dashboard will be published quarterly at www.schroders.com/sustainability
Picture (c) acinquantadue—shutterstock.com_385327918