Tuesday 07 July 2020

Expert updates

CDP pioneers new temperature rating of companies for investors

A pioneering 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 an innovative collaboration with CDP, Europe’s largest 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. [1]

Temperature ratings as of 25 June 2020.

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.

[1] These “pilot” funds are taken as examples. They do not use CDP temperature ratings as part of their investment objectives and process nor as a constraint when it comes to security selection and portfolio construction.

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