Two thirds of largest funds could miss 1.5 degree Celsius target

Over 70% of assets on average across the world’s largest funds will exceed the 2050 target of 1.5 degrees Celsius without large emissions reductions, according to research from ESG Book, a sustainability data and technology company.

Formerly known as Arabesque S-Ray, ESG Book analysed over 35,000 funds globally, covering more than 160,000 fund listings.

It found that without further emissions intensity reductions, none of the world’s major market indices will reach the Paris Agreement goals by 2050 whilst global economic growth is sustained.

The analysis also shows that across funds worth $40 trillion, 20% of assets fail to disclose emissions on average.

Across standard market indices, the Dow Jones Industrial Average in the US has the lowest emissions by a wide market. It emits 40 tons of CO2e per million dollars of revenue, driven by low emissions intensity ratios (EIR) in the finance, retail trade and technology services sectors.

The Nasdaq 100 comes in second place with 74 tons of CO2e per million dollars of revenue.

By contrast, Australia’s ASX 200 has the highest EIR with 327 tons of CO2e per millions of dollars revenue, driven by the utilities and energy minerals sectors.

In ASX 200 ETFs (exchange traded funds), the utilities sector comprises 5% of the fund yet contributes towards 19% of the EIR. Similarly, energy minerals companies make up 9% yet contribute 35% of the EIR.

To help investors better analyse and compare the sustainability profiles of funds, ESG Book has launched Fund Scores, which is part of a wider initiative to scale its services globally.

It will cover over 30,000 mutual funds and 4,000 ETFs across equity, corporate fixed income and hybrid investment strategies, as well as sustainability metrics including ESG scores on 22 topics, UN Global Compact scores, climate scores, and emissions intensity ratios.

“Current events give a stark reminder of the urgent need to transition to a net-zero pathway,” said Dr Daniel Klier, CEO of ESG Book. “However, markets still lack the accurate information required to allocate capital more effectively to sustainable, higher impact assets.

He added, “Consistent, transparent, and accessible data can provide a solution. ESG Book’s new Fund Scores will enable clients to gain a clearer view of the ESG performance of over 35,000 funds globally, providing the transparency that investors need to make informed decisions for a more sustainable future.”

©Markets Media Europe 2022

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