Climate Laggards and Leaders - the poor performance of listed companies

In our big Ethical Investment Analysis project we have found that it is difficult to get information on Carbon emissions from our fund managers that are in a consistent format.  This is a good example of how the field of ethical investing is difficult, there are a number of different formats for reporting, there is disagreement about whether reporting should be on a 'per revenue', 'per profit' or absolute basis.

Further, reporting is difficult as there is no mandated consistent measure of reporting for the underlying companies that the funds are investing in.  The introduction of reporting requirements to meet the TCFD (Task-force for Climate Related Financial Disclosures) in New Zealand is a step towards having some kind of measurable consistency.  But this is not a straight-forward area to measure and compare.  We will share more information with you over the next few years in our newsletters.

For now, we thought it would be interesting to share some information from a recent newsletter from MSCI.  MSCI (Morgan Stanley Capital International) are positioning themselves as the leaders in climate reporting and run a number of readily identifiable indexes.  MSCI have recently upgraded and changed their analysis and reporting metrics, and Carey sat in on an interesting webinar introducing the new systems.

But the thing that caught our eye was this summary - which we thought we would share with you:

1. Listed companies are putting carbon into the atmosphere at a rate that threatens to make the world 3°C warmer – double the warming for preventing the worst effects of climate change – the latest edition of MSCI's Net-Zero Tracker shows.
2. Less than half (43%) of listed companies align with the goal of keeping warming well below 2°C, as called for by the Paris Agreement.
3. Just 10% of listed companies align with a 1.5°C temperature rise, which science tells us offers the best chance of averting a climate disaster.
4. A majority (57%) of listed companies do not align with any globally agreed temperature target.
5. Listed companies in every region of the world – and in every sector – are too hot.
6. Listed companies are on track to burn through their share of the global carbon budget for 1.5°C temperature rise by November 2026, with emissions ticking up as the global economy recovers from the pandemic.
The quarterly report also shows the listed companies with the largest carbon footprints, and shines a light on leaders and laggards in disclosure.
Download the MSCI Net-Zero Tracker here.

This is why Moneyworks will be offering an Ethical investment portfolio option from 1st January 2022 where the fund managers focus on supporting companies that take their climate obligations seriously.  If you would like any information on this new offering and how it could work for you, please contact us by  emailing contact@moneyworks.co.nz.