Schroders launches climate dashboard

Written by Rebecca O'Connor on 18th July 2017

One of the UK’s biggest fund managers has launched a tool that allows investors to see how much progress the world is making towards limiting global temperature rises to 2°C – the official limit set by the Paris Agreement.

Schroders, the UK’s 7th largest fund manager with £41 billion assets under management, said it developed the dashboard because “climate change will be a defining driver of the global economy, society and financial markets over the coming years, decades and beyond.”

The dashboard currently indicates that the world is on course for a temperature rise of 4°C – double the target set at climate talks in Paris in December 2015.

“The danger is that investors think the problem is being tackled, and that their exposure to climate change risks is reduced, when this is not necessarily the case.

 

Andy Howard, head of sustainable research at Schroders, added: “While the issue has moved up investment agendas, the change in strategies has not kept pace.

“The danger is that investors think the problem is being tackled, and that their exposure to climate change risks is reduced, when this is not necessarily the case.

“We developed the Climate Progress Dashboard as part of our efforts to manage the risks and identify the opportunities climate change presents. It provides an objective and transparent view of change to help investors base decisions on the outcomes that are likely, rather than those they would like to see.

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“It’s worth noting the dashboard is a snapshot of where we stand, not a forecast of where we will end. We are in the early stages of changes that will play out over several decades. Estimates could change quickly with small changes in direction over coming years.

“As a result, the dashboard conclusions must be seen as measures of the paths we are currently on, rather than conclusions on where we will end up.”

The dashboard identifies the long-term temperature rise the world is on course for, according to a framework of indicators spanning politics, business, technological progress and energy.

 

All of the 12 indicators – identified as the key drivers and controls of climate change – evaluated by Schroders are currently exceeding the international target to limit global warming to below 2°C, set by the Paris Agreement in December 2015.

Efforts to reach this goal have been complicated by the US President Donald Trump’s decision to pull the United States out of the agreement last month.

The Climate Progress Dashboard highlights the disparity in commitments across sectors and indicators. Whereas global political action points to a 3.6°C temperature rise, current oil and gas production is running at a level consistent with temperature rises twice that level – at 5.3°C , highlighting the risks that remain inherent in energy companies, which have been suffering in light of falling oil prices.

“An all-round view is important”, says Mr Howard, “there is no single measure of progress: reshaping the global economy as a carbon-light version of itself will require a range of markets to expand or contract rapidly in the coming decades.”

Schroders’ Sustainability team will update the Climate Progress Dashboard on a quarterly basis, providing a real-time reflection of how successfully the world is moving towards the Paris target. It will help Schroders’ portfolio management teams to manage the risks climate change presents more effectively.

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