Temperature Score

Less than a quarter of the world’s biggest companies are on course to limit global temperature rise to 1.5 degrees Celsius by 2050, according to new analysis by Arabesque, a leading provider of technology solutions for sustainable finance.

Arabesque assessed fourteen of the world’s largest stock indexes between 2015 and 2019 using its TemperatureTM Score technology, including the FTSE 100, S&P 100, DAX and Nikkei. It found that just under 25% (24.84%) of companies listed on all the indexes are aligned with meeting the 1.5 degree goal, a key focus of COP26 and this week’s Leaders Summit on Climate.

Overall, European companies lead the way towards the 1.5 degrees Celsius 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. However, fewer than one in four companies in the FTSE 100 (23.08%) and S&P 100 (23.08%) are on course to meet the target, whilst 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%.

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Dr. Rebecca Thomas, who led Arabesque’s research, said: “Over recent years, the quantity of corporate emissions data has increased significantly. 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.”

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. 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 degrees Celsius 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. In recent years, however, scientists have underscored the need to limit planetary warming to 1.5 degrees Celsius in order 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.

Georg Kell, Chairman of Arabesque, added: “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. 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.”

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