Global asset manager, Schroders, recently launched a Climate Progress Dashboard, designed to give investors a unique 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.
South Africa, along with many other countries, adopted the Paris Agreement in 2016. The UN Framework Convention on Climate Change aims to keep global temperature increases to below 2 degrees Celsius. As a developing country that is highly vulnerable to climate change, the agreement is critical to South Africa.
According to Andy Howard, Head of Sustainable Research from Schroders, the innovative dashboard, developed by Schroders’ Sustainability team, 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* – identified as the key drivers and controls of climate change – are evaluated by Schroders and are currently exceeding the international target to limit global warming to below 2°C which was set by the Paris Agreement in December 2015, says Howard.
On average, according to the dashboard, the indicators are pointing to a temperature rise around 4°C, double the Paris target.
Efforts to reach this goal have been complicated by the US President Donald Trump’s decision to pull the United States out of the agreement last month.
Howard explains, “The Climate Progress Dashboard highlights the disparity in commitments across sectors and indicators. 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.”
“Climate change is a major challenge for the global economy, industries and financial markets. However, too little attention is paid to developing the tools to manage the risks it presents. Understanding the speed of progress and the implications for investment values is critical”, says 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 investor’s base decisions on the outcomes we are likely to see, rather than those we would like to see.
Howard says, “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.”
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 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