Schroders Climate Dashboard: 2021 could prove the year of decisive change

The latest reading of Schroders Climate Progress Dashboard (CPD) points to a long-run temperature rise of 3.7°C over pre-industrial levels. This was down from the 3.8°C rise recorded in Autumn 2020.

This progress is incremental, however, the pressure on governments and companies globally to make net zero commitments and set science base targets has risen sharply over the last few years. A particular focal point for political action this year will be the 26th Conference of Parties (COP26) due to take place in November this year.

Launched in 2017, the Climate Progress Dashboard provides Schroders analysts, fund managers and clients with an insight into the progress governments and industries across the world are making towards meeting the 2°C temperature rise limit set by the Paris Agreement in 2015.

The Dashboard’s annual assessment of companies’ climate preparedness shows continued growth in the number of companies with stronger climate preparedness scores, reflecting a 60% rise over the last two years of companies that fall into the top band, according to CDP.

All of the dashboard’s 12 key indicators are either unchanged from the previous quarter or have improved, with sharply higher carbon prices the biggest driver of change. They have reached new highs in Europe and are also similarly strong in the US.

Andy Howard, Schroders’ Global Head of Sustainable Investments, commented:

“While the headline state of progress may be disappointing, pressure is building and 2021 could prove the year of decisive change.

“In the run up to COP26, the stream of announcements from policy makers and companies is set to gather pace, adding details and actions to the ambitions and aspirations already released. To date, those announcement have focused more on long term targets than on shorter term policy action, but there are signs of tangible steps in many of those countries.

 “Over the last few years the share of the world’s economic output generated under governments with net zero commitments has risen sharply, and around two-thirds of global GDP and emissions are generated in regions committed to decarbonisation.  

“This is encouraging news, but in order to tackle climate change we need to go beyond longer term targets and also focus on smaller steps to reduce emissions across value chains in the short term. 

“As an active asset manager that invests across the public and private markets globally, we have a fundamental responsibility and imperative to encourage companies to re-orientate their business models towards decarbonisation, and to lead by example with regards to our own business practices.

“Now is not the time to be complacent. We are in a pivotal moment, and whilst some progress is being made, we need an aggressive and coordinated approach across policy makers, corporates and investors.”

Furthermore, Schroders Climate Progress Dashboard reports that just under one-fifth of the value of large, listed global companies have made commitments to decarbonisation in line with the goals laid out in the Paris Agreement. Furthermore, under one-tenth of institutional assets are managed by asset managers with net zero ambitions.1

Schroders joined 29 other asset managers in the Net Zero Asset Management Initiative last December, reinforcing the firm's commitment to achieving the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit global warming to well below 2°C.

To view the full Q4 2020 Climate Progress Dashboard report, please follow this link.

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Source: UN, SBTi, Net Zero Asset Managers Initiative, Refinitiv, Schroders. Data as at February 2021

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.