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Companies may be seeking a marketing boost when they issue climate pledges, or perhaps some see the writing on the wall for intensifying storms and rising seas.
But collectively, their actions still leave the major stock indexes that the companies are included in sharply lagging when it comes to slowing global warming, according to a new report.
No major stock indexes are currently on a pathway to hit the broadly used target of keeping global warming below 2°C above pre-industrial levels, much less the more aggressive 1.5° target that is increasingly pushed by environmental interests.
In fact, four of the seven global stock indexes in the survey, including the U.K.’s FTSE 100
UKX,
and U.S. S&P 500
SPX,
are on temperature pathways of 3°C or above, according to the Science Based Targets initiative, a private-sector effort that helps companies set science-based emissions reduction targets.
Just over 70% of emissions from Germany’s DAX 30
DAX,
companies are covered by science-based targets, resulting in the survey’s best index temperature rating of 2.2°C.
But fewer than 1% of Canada’s S&P/TSX 60
SPTSE,
companies are covered by SBTs, resulting in a temperature rating of 3.1°C, tied for highest with the FTSE 100.
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The performances were judged according to current corporate climate ambitions of companies listed in the leading stock markets among the Group of Seven largest industrialized democracies: In addition to the FTSE 100, the S&P 500, the SPTSX 60 and the DAX 30, Italy’s FTSE MIB
I945,
France’s
PX1,
and Japan’s Nikkei 225
NIK,
were included in the report.
The report was prepared by nonprofit climate-change disclosure tracker CDP and the U.N. Global Compact, a group of countries that align on climate change, corruption, labor and other practices, on behalf of the SBTi.
“G-7 companies have the potential to cause a ‘domino effect’ of positive change across the wider global economy,” Lila Karbassi, chief of programs with U.N. Global Compact and SBTi board chair, said.
“This report highlights the urgent need for markets and investors to deliver on the goals of the Paris Agreement. As the G-7 meets this week, governments must go further to incentivize ambitious science-based target setting,” she said.
Passive investing currently makes up around 40% of U.S. and 20% of European funds, but passive investors are warned that just 19% of listed companies in those seven leading indexes have climate targets aligned with the Paris Agreement goal to keep the rise in global average temperature to well below 2°C (3.6 °F) above pre-industrial levels.
G-7 ministers responsible for climate and the environment recently urged businesses and investors to align their portfolios with the Paris Agreement goals and set science-based net-zero targets by 2050 at the latest. The U.S. has made such a target and wants a 50% reduction by as soon as 2030.
The S&P 500 is up over 12% in the year to date and up more than 32% over the past year. Only 3% of its holdings are oil and gas. The U.S. Oil Fund
USO,
has a year-to-date daily total return of 42%.
