World’s top 500 companies set to miss Paris climate goals
FT analysis of Carbon Delta data shows only 15% of groups are in line with the accord
It has been a big week for climate change — and the companies trying to tackle it.
The UK announced it would adopt a net zero emissions target for 2050, becoming the first major economy in the world to do so. At the same time, BP’s annual energy report revealed that global energy demand surged last year — helping push carbon dioxide emissions to a record high.
Just when government policy signals strengthen, real world data show that the gap between climate ambition and reality is still growing. Caught in the middle of this mismatch, what are companies to do?
The risks they face are material: These include the physical impacts of a warmer world, like rising sea levels, as well as policy risks, such as higher taxes on emissions. The world’s largest companies anticipate climate risks of about $1tn — much of it during the next five years — according to a study published earlier this month by CDP, a non-profit.
A growing number of companies are responding to the uncertainty by announcing their own emissions targets. AP Moller Maersk, the world’s largest container shipping company, has pledged to cut emissions to net zero by 2050, jettisoning bunker fuel. Even Royal Dutch Shell, which derives most of its revenue from selling oil and gas, has an “ambition” to halve its carbon footprint by 2050.
As more companies set emissions targets, that seems like good news for the planet. However, for investors, it can also be confusing to parse through the multiplying corporate climate goals and visions, which are each defined in different ways.
A nascent field of financial analysis has recently sprung up to quantify climate risks and measure which companies are most prepared (regardless of how many environmental press releases they might put out).
One new metric, reflected in the accompanying chart, assesses how the world’s top 500 companies by market capitalisation are preparing for a low carbon world, by measuring their current emissions and the number of low-carbon patents they hold.
This analysis maps out each company’s current behaviour, and correlates it with the level of global warming it would imply by the end of the century, if every company in the world made similar choices.
“We generally avoid using statements that companies make in regard to what their [climate] goals are,” said Phanos Hadjikyriakou, analyst at Carbon Delta, a boutique climate analysis group that modelled the data. “The reason is that it is difficult to judge which of these statements might become concrete, and which are marketing.”
The result shows huge differences in how various sectors are preparing for a decarbonised world. Fields such as utilities, oil and gas, and mining are among those that appear to be doing the least, according to this analysis, while the tech sector and healthcare seem to be doing the most.
But almost all of them have some way to go — the analysis shows that only 15 per cent are in line with the goals of the Paris climate accord, which seeks to limit global warming to well below 2C. If the world is to avoid the worst effects of global warming, that will have to change.