High-emitting firms failing to align with 2°C world

23rd March 2020

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Beata Zyrek

More than eight in 10 of the world's highest-emitting listed companies do not have emission trajectories aligned with limiting global warming to 2°C.

That is according to an annual study by the Transition Pathway Initiative (TPI), which after assessing 283 energy, industrial and transport firms, found that just 43 are aligned with a 2°C world.

This is a slight improvement on last year, with 29% of the companies analysed having improved their governance of climate-related risks, although 9% have regressed.

The researchers said that the transition to a low-carbon economy is well underway in sectors such as shipping, paper and electrical utilities, but that oil and gas and airlines lag significantly behind.

“The International Energy Agency has warned that, while carbon emissions will likely decline this year, in the medium term the coronavirus outbreak could slow down the low-carbon transition as green investments are put on hold by cash-strapped governments and businesses,“ TPI co-chair Faith Ward said.

“It is therefore of deep concern that so few companies were on the right path before the virus struck. Investors must use their influence to ensure that climate commitments are not discarded in the face of financial pressures.“

The study also found that 36% of European companies are aligned with 2°C or below of global warming, compared with 16% of firms in North America, 10% in Japan, 5% in China, and none in Russia or Africa.

For companies that have set emissions targets to 2025 or beyond, the researchers compared those goals with current rates of emissions intensity reduction to establish whether they are on track.

They found that electric utilities and paper companies are reducing their emissions intensity by approximately 4% per year, which would more than deliver their 2025 targets. Average emissions intensity is falling by 1.9% annually across all sectors.

However, oil and gas companies are not currently reducing emissions intensity fast enough to meet their targets, and emissions intensity is actually rising for steel and cement companies with 2025 targets.

It was also found that more than half of the companies studied disclose support for international climate efforts such as the Paris Agreement, but only 40% have incorporated climate change risks and opportunities in their strategy.

Loretta Minghella, first church estates commissioner at the Church Commissioners for England, said: These results raise a red flag for COP26 in November, when the aspirations set out in the Paris Agreement are due to be turned into tougher national commitments, and we can expect to see more capital flow away from those companies failing to align with a 2°C pathway.“

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