Only 1.5% of global investment funds are aligned with the Paris Agreement’s ambitions to arrest global warming below 1.5 degrees Celsius, revealed Clarity AI data.
The tech platform’s global warming alignment analysis of 23,000 funds with over $25 trillion in assets under management found that less than 1,000 of the funds are Paris-aligned to below 1.75ºC – limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C. None are aligned when scope 3 is considered.
Over 70% of the assets analysed are aligned to above 2.3 ºC, but an improvement of 20% was observed from the past two years. Analysis by Clarity AI partner CDP, conducted in October 2021, showed that over 90% of assets were aligned to over 2.3ºC.
Considering Scope 3 – indirect emissions that occur in an organisation’s upstream and downstream activities – less than 0.1% of assets are Paris aligned, and over 85% of assets are above 2.3ºC.
The analysis broke down the alignment of funds and their underlying holdings to the Paris Agreement’s 2.0ºC global warming limit, its 1.5ºC ambition and the 1.75ºC target for Paris-Aligned funds and businesses using the Implied Temperature Rating framework.
For the underlying companies within the 13,044 funds analysed, when comparing 2021 and 2023 data, Clarity AI cited that 30% of companies have set a more ambitious target and therefore reduced their ITR, whilst 51% continue not to have the ambition to be below 3º.
Pablo Diaz-Varela Pena, researcher at Clarity AI, said: “Addressing the misalignment of investment funds with the goals of the Paris Agreement requires continued efforts from both the financial industry and companies across sectors. Increasing the number of companies setting ambitious targets and actively working towards reducing emissions is vital for achieving a sustainable and resilient global economy.”
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