MSCI has announced the launch of its Implied Temperature Rise solution for investors to track how companies align with global temperature targets, according to Sina Finance on September 15. The company-level dataset covers nearly 10,000 listed companies based on the MSCI ACWI Investable Market Index (IMI). Currently, the solution is available as part of MSCI ESG Research’s Climate Value-at-Risk Product, which MSCI developed after acquiring Carbon Delta in 2019.

Climate change is becoming the greatest challenge toward the time. A perception survey conducted by the World Economic Forum (WEF) in 2020 disclosed that for the first time climate and environmental risks were listed as the top five global risks, including extreme weather, climate action failure, natural disasters, biodiversity loss, and human-made environmental disasters. The Paris Agreement has set goals of keeping global temperature warming to below 1.5°C, at most 2°C, by this midcentury. However, the Implied Temperature Risk tool found less than 10% of companies in the MSCI ACWI IMI had an implied temperature target of 1.5°C or less, and less than 50% were aligned with the 2°C temperature rise, implying the Paris Agreement’s goals are still challenging and calls for global efforts.

A recent report from the Task Force on Climate-Related Financial Disclosures (TCFD) recommended all financial institutions should measure and disclose the alignment of their portfolios with the goals set by the Paris Agreement. Backed by an increasing number of financial regulators globally, TCFD intends to drive transparent disclosures in this field. Although more and more companies commit to climate-focused goals publicly, the strength and specific details of their commitments vary widely. It is also difficult to figure out the right metrics. MSCI stated that its Implied Temperature Rise solution is to solve the problem and add clarity and transparency to opaque climate commitments.

Reference

https://finance.sina.com.cn/stock/usstock/c/2021-09-15/doc-iktzqtyt6045668.shtml

https://www.msci.com/documents/10199/4252afd2-3ccc-23f3-acd0-faede163464e

https://assets.kpmg/content/dam/kpmg/ie/pdf/2020/01/ie-the-business-case-for-climate-action.pdf