Just 0.5% of $27trn global funds assets are Paris-aligned

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Just 0.5% of $27trn global funds assets are Paris-aligned

Under 1% of global fund assets are currently in line with the Paris agreement's goal to limit global warming to ‘well-below 2°C', new research shows.

Analysis of over 16,500 investment funds worth $27trn has revealed that just just 158 individual funds, worth 0.5% of the total assets, are currently aligned with the Paris agreement's temperature target of ‘well-below 2°C', according to data from non-profit CDP.

Only 102 funds were temperature rated at 1.5°C, the more ambitious goal of the Paris agreement. Climate scientists have warned this must be the upper limit of global warming if the most catastrophic impacts of climate change are to be mitigated.

Despite mounting net-zero commitments from the financial sector, and an apparent ESG 'boom', the truth is that not even 1% of fund assets are currently Paris-aligned."

The vast majority of global funds assessed are currently invested in assets with an expected temperature path of global warming. Over 8,000 (62% of assets) were temperature scored at above 2.75°C.

Laurent Babikian, global director capital markets at CDP, said: "Global leaders land this week in Rome for the G20 and in Glasgow for COP26, where ensuring 1.5°C is achievable and global climate finance mobilized are two key objectives. But this data is catastrophic. Despite mounting net-zero commitments from the financial sector, and an apparent ESG 'boom', the truth is that not even 1% of fund assets are currently Paris-aligned.

"This is like an x-ray on the industry, exposing almost all assets on the planet to be out of step with climate objectives. It is an urgent reality check for real, credible actions now from the financial community to step up engagement with their portfolios and take decisive action to transition their portfolios onto a 1.5°C path."

When considering Scope 3 emissions, the percentage of funds aligned to the Paris agreement drops from 0.5% to just 0.2%, or just 65 individual funds.

Babikian added: "The fund market reflects the real economy. Though growing fast, science-based emissions targets still cover only a tiny fraction of the investable market. Vast volumes of global capital now need to move to be 1.5° C -aligned, but cannot because the corporate sector ambition is too low.

"We must see that COP26 drives much faster adoption of 2030 targets in line with 1.5°C, and many more financial products which are actually Paris-aligned. Collaboration and engagement are key: investors and lenders must engage all companies in their portfolios to set science-based targets now."

The upcoming climate talks are considered the last chance to put the world on track to meet its climate ambitions.