Not a single one of the G7's leading stock indices are currently aligned with a 1.5°C or 2°C pathway, according to research from the Science Based Targets initiative (SBTi).
In the lead up to the G7 Summit, the analysis shows that the G7 countries' leading indices are on an average temperature pathway of 2.95°C, according to their constituents' current corporate climate ambitions.
Stock indices, composed of stocks of the most significant companies listed on a country's largest exchange, are vital benchmarks to understand market trends.
The report finds that four of the seven indices, including the FTSE 100 and S&P 500, are on rising temperature pathways of 3°C or above. Fossil fuels are a key contributor to the emissions of all seven indices, making up 70% of Canada's SPTSX 60 3.1°C temperature rating and almost 50% of Italy's FTSE MIB 2.7°C rating.
Lila Karbassi, chief of programmes, UN Global Compact and SBTi board chair, said: "G7 companies have the potential to cause a ‘domino effect' of positive change across the wider global economy. This report highlights the urgent need for markets and investors to deliver on the goals of the Paris Agreement. As the G7 meets this week, governments must go further to incentivize ambitious science-based target setting."
G7 ministers responsible for climate and environment recently urged businesses and investors to align their portfolios with the Paris Agreement goals and set science-based net zero targets by 2050 at the latest.
The UK government has just announced it would prohibit firms that lack "clear and credible carbon reduction plans" from bidding for major public sector contracts. Downing Street's plans to reduce emissions by 78% by 2035, in line with a 1.5°C pathway.
The SBTi finds that 35 of the FTSE 100 companies have already committed to align with 1.5°C. However, the report shows that a number of the largest emitters do not have strict climate targets, resulting in the overall index of the 100 biggest firms by market cap on the London Stock Exchange being collectively aligned with the joint-highest temperature rating of 3.1°C.
Alberto Carrillo Pineda, director of science-based targets at CDP and a steering committee member at the SBTi, said: "Ignoring climate science is like continuing smoking despite knowing the risks. Climate and environmental breakdown is the biggest health, economic and societal challenge of our time - it requires immediate action from the world's largest companies.
"Today's findings highlight vital progress, but show there's more to be done to incentivize firms to set science-based climate targets and accelerate the pathway to net-zero."
Sustainable Investment Festival, 22-25 June
International Investment's parent company Incisive Media will host its inaugural Sustainable Investment Festival this summer, featuring keynote speakers, innovative breakout events and sessions including contributions from RL360, KBI Global Investors and deVere Group to help investors navigate this rapidly-evolving area of the market. Click here for more information.
