On behalf of the Science Based Targets Initiative (SBTi), the Global Compact has teamed up with the international non-profit CDP, an institution that supports companies in setting ambitious targets to reduce emissions.
In December 2015, more than 190 signatories agreed in Paris to limit the rise in global mean temperature to well below 2 ° C (3.6 ° F) above pre-industrial levels, hoping to keep it as close as possible to 1.5 ° Keep C (2.7 ° F).
Ahead of the UK’s G7 summit, which begins Friday, the Taking the Temperature report shows that the indices of the G7’s major stock exchanges are averaging 2.95 ° C over four of the seven temperature trajectories of 3 ° C or above – well above the Paris benchmark.
Stock indices are made up of the major companies listed on a country’s largest stock exchange and are important benchmarks for understanding market trends and directions.
Deliver on Paris
Since the G7 economies account for almost 40 percent of the global economy and around 25 percent of global greenhouse gas emissions, the G7 companies are obliged to reduce their emissions, according to the SBTi.
G7 companies have the potential to trigger a “domino effect” of positive change in the entire global economy – Lila Karbassi, UN Global Compact
“G7 companies have the potential to trigger a ‘domino effect’ of positive changes in the entire global economy,” said Lila Karbassi, program director, UN Global Compact and chairwoman of the SBTi board, and urged the largest listed G7 companies to urgently challenge the climate increase action.
Invest in the planet
Currently, 70 percent of the Canadian SPTSX 60 index is at a temperature rating of 3.1 ° C and nearly 50 percent of the Italian FTSE MIB is at 2.7 ° C.
While passive investments currently make up around 40 percent of US and 20 percent of European funds, investors are warned that only 19 percent of companies listed in the G7 indices have climate goals in line with the Paris Agreement.
The G7 ministers responsible for climate and environment recently called on companies and investors to align their portfolios with the Paris targets and to set science-based net zero emissions targets by 2050 at the latest.
“This report underscores the urgent need for markets and investors to meet the goals of the Paris Agreement … Governments must go further to incentivize ambitious science-based goals,” said Karbassi.
Room for optimism
Despite these results, however, the dynamism of action in the G7 countries is growing, with the analysis citing 2020 as a milestone year for climate commitments.
About 64 percent of all corporate greenhouse gas reduction targets reported to the CDP last year were set by companies based in G7 countries, and the annual rate of science-based targets doubled in 2020 from 2015 to 2019.
Urgent need for action
The report also identified four pressing priorities for climate action.
It recommended that companies and governments work together to leverage a positive feedback cycle in which private action and government policy are mutually reinforcing.
Second, companies need to work with suppliers to decarbonise supply chains.
Third, investors are encouraged to embed science-based goals in sustainability-related bonds and climate finance standards.
Finally, the report advised financial institutions to set science-based portfolio-level goals with underlying assets to create a ripple effect across all sectors of the economy.