Schroders’ Climate Change Dashboard Update: Structural changes needed to slow temperature rises despite impact of Covid-19 crisis

The short-term effects of higher carbon prices and Covid-19 induced lockdowns have had little impact on the long-term trajectory of global temperatures, Schroders’ Climate Progress Dashboard has today found.

Global temperatures remain on course to rise by 3.9°C as of the end of June 2020, unchanged from the previous quarter and much higher than the Paris Agreement target, despite global energy demand and carbon emissions[1] significantly decreasing due to huge reductions in road and air travel.

While those sharp drops in activity help, structural changes are required globally to ensure this crisis proves a turning point in international commitments to sustain cuts in greenhouse gas emissions. 

For example, while the European Union has announced that up to three-quarters of the region’s Covid-19 stimulus plan will be tied to the delivery of climate targets, the global focus[2] on climate change has slowed placing greater emphasis on the delivery of these EU commitments and their translation into economic investment.

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 target set by the Paris Agreement in 2015.

Andrew Howard, Global Head of Sustainable Investment, Schroders, commented:

“On the face of it, the Covid-19 crisis appears to have sparked a turning point in global greenhouse gas emissions. If current lockdown trajectories continue, global energy demand may fall by 6% and carbon emissions by 8%, according to data from the International Energy Agency.

“However, there is also an unprecedented economic cost. The International Monetary Fund has predicted the global economy could shrink by as much as 5% this year. It has revealed unemployment levels have already reached the highest levels seen in at least half a century.

“We believe that as economies recover from the Covid-19 crisis, falls in emissions are likely to be reversed, if recoveries from past crises provide any guide. Tougher structural changes are needed if we are going to avert the equally devastating long-term impacts of the climate crisis.“

The dashboard uses a framework of 12 indicators spanning politics, business, technology and energy. By focusing on longer-term indicators of progress and action, it provides a relatively stable view of the long-run temperature rise the world currently faces.

Summary of changes

The chart below plots the changes in each indicator relative to the last update (Q1 2020).

Changes in temperature implied by each measure relative to last quarter, °C

The chart below plots changes in each indicator since Schroders launched the Climate Progress Dashboard in mid-2017.

Changes in temperature implied by each measure since inception (mid-2017), °C

Source: Schroders calculations using inputs from various sources. Data updated as of start-July 2020.

[1] According to International Energy Agency

[2] According to Schroders analysis of Politico and World Politics Review

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.