With the critical COP26 conference just around the corner, investors are seeking new levels of transparency into the alignment of listed companies with global climate goals. Index provider MSCI has made data on the implied temperature rise of over 2,900 companies, which are constituents of its ACWI Index, publicly available on its website to allow investor access to the data and transparency required to navigate their transition to net zero.
Implied Temperature Rise assesses the commitments of listed companies to low-carbon transition using a simplified and powerful forward-looking metric: companies’ alignment with global temperature targets, which is expressed in degrees Celsius.
The solution was modelled to meet the design recommendations set out by the Task Force on Climate-Related Financial Disclosures (TCFD) portfolio alignment team for all segments of the financial sector to measure and disclose temperature alignment of portfolios as well as target-setting frameworks.
It captures crucial benchmarks, such as the 2°C target set by the Intergovernmental Panel on Climate Change, as well as the 1.5°C limit, popularized through the Paris Agreement, as well as companies’ decarbonization plans. Implied temperatures are calculated by comparing companies’ projected emissions with their allocation of the global remaining carbon budget, a figure that sets the upper limit on allowable carbon emissions to keep the planet below key temperature targets, a benchmark that is also referenced in MSCI’s quarterly Net-Zero Tracker.
From October 28, global investors can search a company’s name or ticker to access its Implied Temperature Rise, decarbonization target (through MSCI’s Target Scorecard), and its MSCI ESG Rating which has been available since 2019.
Remy Briand, global head of ESG and climate at MSCI, says: “As COP26 fast approaches, we are confident this new data adds much-needed clarity to the discussion on the role of capital markets in combating climate change. We are proud to be a leader in driving ESG and climate transparency, equipping investors with the data they need as they sharpen their focus on the financial impact of climate change, raising awareness of the value of ESG data and ratings, and improving disclosure standards.”