CDP launches new climate rating system

7 July 2020

CDP launches new climate rating system

CDP has launched a new set of climate ratings that gauges the temperature pathway of investor portfolios, funds, and stock indices, to help financiers better understand and manage escalating climate risks. The new tool will help investors to futureproof their portfolios and funds from worsening climate impacts and stranded asset risks.

Under the Paris Agreement, global nations are striving to keep global warming to well below 2 degrees centigrade, however the UN has warned that the world is heading for a potentially devastating 3.2 degrees rise this century and more is needed to be done to ensure that we can transition to a lower carbon future.

The data produced by CDP is based on an assessment of each company’s emission-reduction targets, as reported to CDP each year, converted into a temperature rating. The data provides insight into the full range of emissions from a company, including “scope 3” emissions from a company’s products, which for a large oil company would include fuel used in vehicles.

At IMS we consider the new rating system to be an excellent way to clearly convert confusing climate data into an easily understandable metric that can be compared to a global target. This simplification should enable clarity for investors wishing to factor climate change into their investment decisions.