The vast majority of high-emitting listed firms are failing to cut their carbon emissions to the rate needed to keep global warming below 2°C above pre-industrial levels.
That is according to a report from the Transition Pathway Initiative (TPI), which after studying 274 publicly listed companies, found that just one in eight have emissions compatible with under 2°C of warming.
Almost half of the firms studied do not adequately consider climate risk in their operational decision-making, while a quarter fail to report their CO2 emissions at all.
This is undermining a key recommendation of the Taskforce on Climate-related Financial Disclosures (TCFD), and the ability of pension funds to manage risks in portfolios.
“The fact only one in eight of the highest-emitting firms are responding at anywhere near the pace required is an urgent challenge to investors,“ TPI co-chair, Adam Matthews, said.
Failure to recognise the slow pace of corporate progress will directly undermine our ability as pension funds to manage the financial risks within our portfolio for our beneficiaries.“
The TPI is backed by investors with around $14trn (£12.6trn) in assets under management, and used FTSE Russell data to analyse companies responsible for 41% of global emissions from publicly listed firms.
Of the 130 companies assessed for the second consecutive year, 27% had improved how they integrate climate change into their business decisions.
But 84% of the firms studied do not disclose an internal carbon price, while 86% are yet to undertake and disclose climate scenario planning, which is a critical part of TCFD reporting.
Only E.ON, lberdrola, Stora Enso and Edison International have their current and planned carbon emissions aligned with the ambition to limit global warming to 2C.
“Today's research shows clear leaders and laggards emerging within sectors from airlines to aluminium – and that gives investors an investment-relevant decision to make today, TPI co-chair, Faith Ward, said.
“As the effects of climate change accelerate we can expect to see more capital flow away from those companies that bury their head in the sand, and towards those companies aligning with a 2°C pathway.“
Image credit: iStock
