CDP pioneers new temperature rating of companies for investors
A new set of climate ratings for measuring and communicating the global warming path of companies and investments has been launched by global non-profit CDP.
The CDP temperature ratings dataset provides a temperature pathway for over 4,000 global companies, based on emission reduction targets covering all relevant GHG emissions in a company’s value chain. This data is key for investors to better manage climate transition risk and future-proof their portfolios and funds from costly climate change.
As part of a collaboration with CDP, European asset manager Amundi is the first to use CDP’s temperature ratings to grow its ESG research capabilities and measure the temperature of its investment universe. For this launch, the ratings will be piloted on four global multisector equity funds, which have their own investment objectives.
The temperature rating means that the emissions attributable to the fund are in line with this global temperature rise, based on the emission reduction targets of the fund's investee companies.
As part of its ESG research toolbox, the CDP temperature ratings will bolster Amundi’s forward-looking assessment capabilities in order to identify priorities and the degree of action required, notably through engagement with companies across the investment universe to set more ambitious, science-based emissions reduction targets.
CDP’s temperature ratings build on a forthcoming protocol developed by CDP and WWF to translate companies’ emissions targets into temperatures. The ratings reflect the global warming likely to occur if global GHG emissions are reduced at the same speed as the selected company’s emissions, based on its stated target ambition.
1.5°C is the maximum rise in global temperature which science dictates is possible to avoid the worst effects of global warming, and each incremental temperature increase is likely to have devastating impacts. Currently, climate action is consistent with limiting warming to 3.2°C by the end of the century.
For its temperature ratings, the dataset uses emissions and target data from CDP – the global disclosure platform and world’s largest environmental dataset.
Emily Kreps, global director of Capital Markets at CDP, says: “Climate science tells us that we must rapidly decarbonise 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.”
Jean-Jacques Barbéris, head of the ESG business line for Amundi’s General Management, adds: “We are proud to partner with CDP for this initiative. Investors need to back the companies that are supporting a faster transition of our economy to a low-carbon model, and encourage others through targeted engagement.
Mobilisation and concrete action can only be achieved through a common understanding of the target impacts set by companies, and a recognition of the remaining required efforts. CDP’s new temperature ratings support this collective journey as the economic and financial ecosystem develops new methodologies and data. By being better equipped, investors can future-proof their investment universe from the impact of climate change and improve corporate dialogue.”