CDP Introduces Company ‘Temperature’ Rating for Investors

(Photo Credit: Johannes Schwaerzler, Unsplash)

by | Jul 7, 2020

CDP Introduces Company ‘Temperature’ Rating for Investors

(Photo Credit: Johannes Schwaerzler, Unsplash)

Global nonprofit CDP just introduced a new “temperature” rating in °C for 4,000 global companies. The climate ratings are based on the company’s emission reduction targets covering all relevant greenhouse gas emissions within their value chain.

CDP said that these ratings build on a forthcoming protocol that the nonprofit is developing with WWF to “translate companies’ emissions targets into temperatures.” The ratings convey the global warming that’s likely to occur if greenhouse gas emissions worldwide were to be reduced at the same speed as a particular company’s emissions, based on that company’s public target.

This data helps investors better manage climate transition risk and future-proof their portfolios and funds, CDP noted.

“Investors increasingly want to align their portfolios with international climate goals and the economy of the future,” said Emily Kreps. “By providing a clear, science-based and uniform standard for companies’ ambition, CDP temperature ratings now allow investors to do that by benchmarking, communicating and reducing the temperature of their portfolios and products.”

Amundi, the largest asset manager in Europe, will be the first to use the rating as part of its ESG analysis as well as for monitoring four global multi-sector equity funds, according to CDP.

“Investors need to back the companies that are supporting a faster transition of our economy to a low-carbon model, and encourage others through targeted engagement,” said Jean-Jacques Barbéris, head of the ESG business line for Amundi’s general management. “Mobilization and concrete action can only be achieved through a common understanding of the target impacts set by companies, and a recognition of the remaining required efforts.”

As CDP pointed out, 1.5°C is the maximum rise in global temperature possible for avoiding the worst effects of global warming, according to scientists. The nonprofit added that each incremental temperature increase is likely to have devastating effects.

“Currently climate action is consistent with limiting warming to 3.2°C by the end of the century,” CDP said.

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