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Getting ahead of climate risk requires a detailed understanding of your carbon footprint and underlying sources of carbon emissions – as well as forward looking metrics on your exposure to physical and transition climate risks.
Major global companies face up to 283 USD billion carbon pricing costs and 13% earnings at risk by 2025, under a high carbon price scenario.
For many of these companies, the largest carbon pricing risks relate to greenhouse gas emissions (GHG) in the U.S. where carbon prices could increase significantly in the future as the world transitions to a low carbon economy.
Carbon Earnings at Risk
Carbon pricing mechanisms are an important policy tool to reduce GHG emissions and direct capital towards cleaner energy and lower-carbon solutions. According to the World Bank, both the amount of emissions covered by carbon pricing and the price levels are still too low to meet the objectives of the 2015 Paris Agreement to limit global temperature rise this century to well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit warming to 1.5 degrees Celsius. Carbon pricing policies are likely to ramp up as regions seek to achieve their Nationally Determined Contributions (NDCs) to reduce emissions and deliver on the Paris Agreement.
We quantify current pricing schemes in more than 45 jurisdictions, together with potential future carbon pricing scenarios required to achieve the goals of the Paris Agreement to help companies and financial institutions navigate carbon pricing risk.
The dataset is used by companies to stress-test their ability to absorb future costs and inform the business case for low carbon innovation. Financial institutions apply the dataset across portfolios and loan books to manage risk exposure.
Click on the tiles to reveal the total carbon pricing risk exposure.
Major global companies are on track for >3ºC warming, falling 72% short of required emissions reductions to achieve the Paris Agreement.
The Paris Agreement is a legally binding treaty on climate change adopted by 196 Parties at COP 21 in Paris on 1 December 2015. It's goal is to limit global warming to well below 2, and preferably to 1.5 degrees Celsius, compared to pre-industrial levels.
Companies are showing a growing commitment to reduce environmental impacts and publicly disclose reduction targets. 64% of major global companies publicly disclose carbon targets, however significantly more ambitious targets will have to be adopted to achieve the reductions required to achieve the Paris Agreement goal for a 2-degree future. By setting science-based targets, companies and financial institutions can publicly demonstrate they are taking their environmental responsibilities seriously and are further ready to compete and succeed in a low-carbon world.
A Paris Alignment assessment looks at the alignment of a company or investment portfolio with the Paris Agreement goal. We help companies and financial institutions to measure, manage and report their alignment.