Equity index giant MSCI to give 10,000 firms global warming ratings

The firm is launching Implied Temperature Rise scores, which estimate whether a firm's activities and plans are consistent with keeping global warming below 2 degrees Celsius

Global equity index compiler MSCI is to start providing data on how much the world's top 10,000 firms are likely to be contributing to global warning.

The firm, which runs the widely-tracked $60 trillion All Country World Index, is launching Implied Temperature Rise scores, which estimate whether a firm's activities and plans are consistent with keeping global warming below 2 degrees Celsius.

"The idea is to get companies to change their strategies," said MSCI's head of ESG and Climate, Remy Briand, who estimates nearly 60% of firms still don't disclose even the most basic environmental data.

MSCI's new approach converts the current and projected greenhouse gas emissions, taking into consideration emissions reduction targets, of each company to an estimated rise in global temperature.

Projections are calculated by comparing those projected emissions with the global carbon budget that remains if the planet is to keep temperature rise this century below 2°C.

Briand laid out examples using two oil giants, Exxon Mobil and Royal Dutch Shell.

Exxon, which has been under heavy scrutiny for its approach to climate change, produces a 4C rise score - a scenario that scientists warn would lead to unprecedented heatwaves, severe droughts, and a major rise in sea levels and mass flooding.

Shell produces an implied 2C rise, having set targets to cut the carbon intensity of its products by at least 6% by 2023, by 20% by 2030, by 45% by 2035 and by 100% by 2050.

"The message is to make the commitment more public," Briand said.

His assumption is that because MSCI's indexes and data are used by most of the world's big investors, companies will need to have low implied temperature rise scores to encourage those money managers to park their cash in them.

There are currently no standardised rules around what the big global firms have to disclose about their emissions. Many also make misleading claims that they are on course to hit net zero targets, Briand said, by leaving out large chunks of their business when they make their own projections.

Briand said leaders going to the UN's COP26 climate change conference in Scotland later this year should pledge to fix those kinds of problems.

"A wish would be to get net-zero commitments across the board for all companies," he said. "If that happens, if it becomes compulsory across many countries, there will an acceleration in companies' strategies".