Schroders has launched a new tool for measuring climate change that it aims to use to boost its sustainability stock selections.
The Climate Progress Dashboard has been designed to give investors an insight into the progress governments and industries are making towards meeting the 2°C temperature rise target and the transition to a low-carbon global economy.
The dashboard has been developed by Schroders’ Sustainability team. It identifies the long-term temperature rise the world is on course for, according to a framework of indicators spanning politics, business, technological progress and energy.
All of the 12 indicators (listed below) – identified as the drivers and controls of climate change – evaluated by Schroders are currently exceeding the international target to limit global warming to below 2°C, set by the Paris Agreement in December 2015.
On average, according to the dashboard, the indicators are pointing to a temperature rise around 4°C, double the Paris target.
The dashboard highlights the disparity in commitments across sectors and indicators, Schroders said in a statement announcing the launch.
Whereas global political action points to a 3.6°C temperature rise, current oil and gas production is running at a level consistent with temperature rises twice that level, highlighting the risks that remain inherent in energy companies.
Andy Howard, head of sustainable research, Schroders, said that climate change is a “major challenge” for the global economy, industries and financial markets. However, he feels that too little attention is paid to developing the tools to manage the risks it presents.
‘Implications for investment’
“Understanding the speed of progress and the implications for investment values is critical,” said Howard.
“We developed the Climate Progress Dashboard to provide a unique perspective into the pace of change. It tracks trends in key progress markers towards decarbonisation. It provides an objective and transparent view of change and should help investors base decisions on the outcomes we are likely to see, rather than those we would like to see.
“An all-round view is important. There is no single measure of progress: reshaping the global economy as a carbon-light version of itself will require a range of markets to expand or contract rapidly in the coming decades,” he said.
Schroders’ Sustainability team will update the Climate Progress Dashboard on a quarterly basis, providing a real-time reflection of how successfully the world is moving towards the Paris target. It will help Schroders’ portfolio management teams to manage the risks climate change presents more effectively, the company said.
The indicators are:
- Political Ambition
- Public Concern
- Political Action
- Corporate Planning
- Climate Finance
- Carbon Prices
- Electric Vehicles
- Renewable Capacity
- Carbon Capture & Storage
- Oil & Gas Investment
- Coal Production
- Oil & Gas Production
Please click here to see the Climate Progress Dashboard in full.