CDP launches climate ‘temperature rating’ system for investors

CDP launches a new set of climate ratings for measuring and communicating the global warming path of companies and investments.

Under the Paris accord, countries agreed to keep the average global temperature increase to no more than 2 degrees Celsius and ideally to 1.5 degrees Celsius above pre-industrial norms by 2050.

The investor-backed non-profit company has launched a new set of climate ratings for translating corporate ambition into long-term temperature outcomes, allowing targets to be clearly outlined for investors.

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.”

CDP’s temperature ratings dataset provides a temperature guide for over 4,000 global companies, based on the perceived climate ricks of their emissions reduction strategies covering all three scopes across the value chain.

The rating system, which builds on a new approach being developed by CDP and WWF, will communicate and reduce the temperature of investor’s portfolios, funds, and stocks, to help better understand and manage climate risks.

Europe’s largest asset manager Amundi is the first to ‘lead the way’ to using CDP’s temperature ratings to grow its ESG research capabilities and measure the temperature of its investment universe. 

It has also revealed that four of its global multisector equity funds, including CPR Invest – Climate Action and CPR Invest – Food For Generations, are in lined with temperature pathways between 2.6C-2.7C.

New data, posted by the United Nations, from WMO reveals that the annual global temperature is likely to be at least 1C warmer than pre-industrial levels in each of the coming five years.

“This study shows the enormous challenge ahead in meeting the Paris Agreement on Climate Change target of keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius”, said WMO Secretary-General Petteri Taalas.

WMO explained that the slowdown in industrial and economic activity due to the pandemic is not a substitute for sustained and coordinated climate action.

“Due to the very long lifetime of CO2 in the atmosphere, the impact of the drop-in emissions this year is not expected to lead to a reduction of CO2 atmospheric concentrations which are driving global temperature increases.”

In partnership with CDP, Amundi believes they will be better equipped so that “investors can future-proof their investment universe from the impact of climate change and improve corporate dialogue.”