New report calls on governments and investors to increase pressure on firms to align emissions reduction strategies with 1.5°C scenarios.
Four-fifths of companies in G20 countries have not aligned their climate change strategies with the goals of the Paris Agreement using science-based targets, according to new research.
While a quarter of firms from G7 countries have set science-based targets to reduce their greenhouse gas emissions consistent with limiting climate change to 1.5°C , only 6% of firms from non-G7 members of the G20 have done so.
This means there is a risk that efforts to transition to a low-carbon economy could be insufficient to keep climate change to manageable levels, posing risks to investor portfolios and to the wider society and environment, as underlined by the UN Intergovernmental Panel on Climate Change (IPCC) report published last month.
These findings come from an analysis of the climate targets of 4,215 large companies reported to the Climate Disclosure Project (CDP), conducted by the Science Based Targets initiative (SBTi), the global body established to set and verify company emissions reduction targets in line with science.
“Science-based targets are proven to cut corporate emissions at the pace and scale required – they are a vital part of the puzzle for governments and companies worldwide. Ahead of the G20 Summit and COP26, our world leaders must put their full support behind science-based targets as an effective way to slash emissions” said Lila Karbassi, Chief of Programmes at the UN Global Compact and SBTi Board Chair.
A previous study has shown that science-based targets have cut corporate emissions by 25% on average over the last five years. Firms using SBTi-verified targets are on track to reduce emissions by half between 2020 and 2030 on average, which is the rate considered necessary by the UN IPCC to keep climate change at Paris-agreed levels.
The SBTi is calling on all firms to align their emissions reduction strategies with climate science and on governments to develop policies to support decarbonisation, thus creating a positive feedback cycle in which private sector action and government policies reinforce one another.
It also recommends that investors embed science-based targets into sustainability-linked bonds and climate financial standards, while financial institutions should setting portfolio-level science-based targets and undergo engagement with underlying assets.
“Our G7 world leaders must introduce ambitious national commitments, and other measures, that incentivise companies to set robust decarbonisation targets while encouraging G13 nations to follow suit,” said Alberto Carrillo Pineda, Managing Director and Co-Founder of the SBTi.
“These milestone G20 and COP26 events are vital opportunities for all companies and governments to adequately respond to climate science and drive real corporate climate action around the world.”
G20 leaders are due to meet in Rome for a summit on October 30-31 ahead of COP26.
The new research updates the Taking the Temperature report, prepared by CDP and the UN Global Compact on behalf of SBTi in June, which analyses the emissions reduction targets of companies in G7 equity indexes. The report produced a temperature rating per index, showing the level of global warming reached if companies in the index met their targets.
It found that 71% of Germany’s DAX 30 companies’ emissions are covered by science-based targets, resulting in the lowest index temperature rating of 2.2°C. The new research includes both G7 and G13 index temperature ratings, finding that indexes with a higher share of emissions covered by SBTs result in lower overall temperature ratings. It also found that, within all G7 Indexes, only 10% of companies are responsible for at least 48% of total index emissions.
Earlier this week, the World Economic Forum announced continued growth in the number of companies supporting its Stakeholder Capitalism Metrics initiative, designed to encourage reporting by large firms on a wide range of sustainability-related metrics and factors. Since January 2020-2021, over 100 companies have shown support for this initiative with over 50 already including the metrics in their 2020-2021 reporting materials.
Drawn from existing standards, the Stakeholder Capitalism Metrics provide a set of metrics that can be reported on by all companies, regardless of industry or region.
The metrics also offer comparability, which is particularly important for informing ongoing efforts to create a systemic, globally accepted set of common standards for reporting on sustainability performance.