Arabesque Warns Against Failure to Limit Global Warming

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    Stockholm (NordSIP) – To accomplish the 2015 Paris Agreement goal of keeping global warming to well below 2°C and pursuing efforts to limit it to 1.5°C both private and public sectors need to pull together. Over the last year, the TPI, Climate Action, the UN-convened IIGCC and the Net-Zero Asset Owner Alliance, have repeatedly insisted on the importance of achieving these goals and warned that much work still remains to be done.

    Now, a recent analysis by Arabesque, a provider of technology solutions for sustainable finance, suggests that less than a quarter of the world’s biggest companies are on course to limit global temperature rise to 1.5°C by 2050.

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    “The array of public declarations and pledges ahead of COP 26 in Glasgow signifies a promising new alignment of ambitions to face the climate crisis,” Georg Kell (Pictured), Chairman of Arabesque, says. “However, declarations of good intention by themselves are not going to lead to the required timely actions. In fact, despite the growing number of commitments, average carbon dioxide levels in the atmosphere have increased since 2015. This year is a potential turning point, offering corporate leaders a chance to think big and to act accordingly. But time is running out,” Kell adds.

    Alignment with 2°C

    Using its Temperature Score technology Arabesque assessed the alignment of companies listed in fourteen of the world’s largest stock indexes, including the FTSE 100, S&P 100, DAX and Nikkei, between 2015 and 2019. Arabesque’s Temperature Score assesses thousands of data points to assign companies globally with a score in degrees Celsius to reflect their expected environmental impact by 2030 and 2050.

    The results show that only 24.84% of the companies considered are aligned with meeting the 1.5°C goal. However Paris alignment varies widely across indices. Overall, European companies lead the way towards the 1.5°C target in 2050, with companies in the Stockholm 30 (50%), DAX 30 (39.29%), Helsinki 25 (33.33%) and SMI 20 (33.33%) the best performers.

    Based on the new analysis of global indexes, it found that on average 70% of companies worldwide would satisfy the 2030 climate target of 2°C set out under the Paris Agreement, with 61% on track to meet the same goal by 2050, up from 41% in 2015 when the targets were adopted by 196 countries at COP 21.

    However, in recent years, scientists have insisted on the need to limit planetary warming to 1.5°C  to stave off the worst impacts of the climate crisis, an ambition that over 75% of companies analysed in Arabesque’s latest research are not currently on course to achieve.

    Misalignment with 1.5°C

    In this case, the half-degree difference matters. According to Arabesque, fewer than one in four companies in the FTSE 100 (23.08%) and S&P 100 (23.08%) are on course to meet the 1.5°C target. Only 8.51% of companies in the Hang Seng Index 55 and just 4.55% of those in Australia’s ASX 50 are aligned with the 1.5 degree goal. In Japan, 26.67% of companies in the Nikkei 225 are on course.

    Arabesque’s data also shows that 15% of companies listed across the fourteen indexes are not publicly disclosing their greenhouse gas emissions, equating to approximately USD 5 trillion in market capitalisation. The Hang Seng Index has the highest number of non-disclosures, with 29% in 2019, compared to the FTSE 100 with the lowest at 2%.

    “Over recent years, the quantity of corporate emissions data has increased significantly,” says Dr. Rebecca Thomas, who led Arabesque’s research. “Previous research from the Temperature Score shows that from 2014 to 2019, the proportion of companies disclosing at least scope 1 and scope 2 emissions rose by almost 25%. However, it is clear from our latest analysis that this has yet to translate into corporate climate action at scale. While overall progress is encouraging, a lot more needs to be done to keep the 1.5-degree goal within reach.”

    Image courtesy of Arabesque

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