- Based on reported emissions targets – if achieved -
European companies are in line with a 2.7 °C increase in global
warming by 2100.(1)
- The top European companies by decarbonization reported a
15% drop in emissions last year – equivalent to the annual
emissions of the Netherlands.
- Switzerland,
Denmark and Sweden closest to Paris agreement target of 'well-below 2°C';
Belgium, UK, and Italy have highest temperature, at
3.0°C.
- Almost all banks lending to European companies and many asset
managers now say they want to align with Paris agreement – but under 1 in
10 European companies currently meet that standard.
- Capping global warming at 1.5°C would take an 8x
increase in the current ambition level of European corporates on
emissions, report estimates.
BERLIN, March 2, 2021 /PRNewswire/ -- A €4
trillion mismatch is forming between bank lending that aims to
be 'Paris-aligned' and the market
for this corporate lending in Europe, according to new analysis from
EU-funded non-profit CDP Europe and global management consulting
firm Oliver Wyman.
Running hot: accelerating Europe's path to Paris, released today, estimates that
95% of all corporate lending in Europe comes from banks with a Paris-alignment ambition.
But under 1 in 10 European companies so far have emissions
targets aligned with Paris'
well-below 2°C goal – meaning banks financing these companies are
far from Paris-aligned
today.2
The research is based on nearly 1,000 European companies
worth around 80% of Europe's market value disclosing data in 2020
to CDP, which runs the global environmental disclosure system, and
wider market research.
The gap is starting to close. The latest corporate data shows
momentum behind better target-setting among companies, with the
best decarbonizing fast. 56% of companies report now having
a transition plan in place – rising to over three quarters
in the energy sector. Encouragingly, over 50% of European
companies by market value have now joined the Science Based
Targets initiative, which approves whether emissions targets
are aligned with the Paris
agreement.3
The best companies, in terms of decarbonization, reported total
emissions reductions of 15% last year, and cut carbon
intensity (emissions per revenue) by one fifth.
But wide differences exist. In the steel and electric utilities
sectors, the data shows the best companies are up to 4 times as
carbon efficient as the lowest performing. And just 35%
of companies in the highest-impact industries are so-far disclosing
data on their most important indirect – Scope 3 – emissions, which
make up a minimum (and underreported) 80% of all total
emissions reported.
The report authors also modeled three potential scenarios for
2030, setting out alternative rates of acceleration in corporate
target-setting. Based on this, capping warming at 1.5°C would take
an 8x increase in the current ambition level of European
corporates on emissions.4
The scenarios are based on CDP scores, which give an overall
indication of a company's current climate performance, and CDP
temperature ratings, which assigns a temperature pathway to
companies based on emissions reduction targets.
The report also points to the key role banks and investors play
in achieving this target. Currently, only half of
institutions assess if clients or investee companies have
Paris-aligned strategies. But
without more engagement, the report estimates that in a 'modest
acceleration' scenario banks may need to adjust their lending
portfolios by 20-30% to meet their Paris goals.
Overall, Europe's corporate
sector is on track for 2.7 °C of global warming by the end
of the century – with countries ranging from 2.3°C
(Switzerland) to 3.0°C
(United Kingdom, Belgium, Italy).
The new report is presented today at the CDP Europe Awards, held
with the European Investment Bank on Euronews, where
speakers include Angela
Merkel and the European Commissioner for
Financial Stability, Financial Services and the Capital Markets
Union.
Maxfield Weiss, Executive
Director of CDP Europe, said of the results:
"The European corporate sector is running hot. Based on
current ambition, it's on a 2.7°C path of warming – over a degree
more than climate science says we need to achieve to prevent
climate change's most catastrophic impacts. That leading corporates
across many sectors are now setting ambitious targets and
delivering emissions reductions is positive, and shows rapid
decarbonization is doable. But with less than 1 in 10 companies
having ambitious enough targets, our new data shows we need far
more action from corporates and financial institutions to make good
on our goals. Banks and investors have their own big ambitions: now
we need them to engage companies more to raise the level of
disclosure and action so we accelerate Europe's path to Paris and to deliver the European Green
Deal."
James Davis, Partner,
Financial Services and Head of Sustainable Finance Europe,
Oliver Wyman, added:
"This year's paper includes encouraging developments, with
more than half of companies setting out transition plans, and many
making real strides in cutting emissions. But it also shows how
much we need to hasten the pace if we are to hit the Paris targets. Many of the region's leading
financial institutions have set out a big ambition to align their
lending and investments with Paris
and that will help create a virtuous circle - those companies who
are getting ahead of the transition should find it easier to raise
capital."
The full CDP Europe Report is available for download here:
www.cdp.net/europeanreport
About CDP
CDP is a global non-profit that runs the world's environmental
disclosure system for companies, cities, states and regions.
Founded in 2000 and working with over 590 investors with
$110 trillion in assets, CDP
pioneered using capital markets and corporate procurement to
motivate companies to disclose their environmental impacts, and to
reduce greenhouse gas emissions, safeguard water resources and
protect forests. Over 10,000 organizations around the world
disclosed data through CDP in 2020, including more than 9,600
companies worth over 50% of global market capitalization, and over
940 cities, states and regions, representing a combined population
of over 2.6 billion. Fully TCFD aligned, CDP holds the largest
environmental database in the world, and CDP scores are widely used
to drive investment and procurement decisions towards a zero
carbon, sustainable and resilient economy. CDP is a founding member
of the Science Based Targets initiative, We Mean Business
Coalition, The Investor Agenda and the Net Zero Asset Managers
initiative. Visit cdp.net or follow us @CDP to find out more.
About Oliver Wyman
Oliver Wyman is a global leader
in management consulting. With offices in 60 cities across 29
countries, Oliver Wyman combines
deep industry knowledge with specialized expertise in strategy,
operations, risk management, and organization transformation. The
firm has more than 5,000 professionals around the world who work
with clients to optimize their business, improve their operations
and risk profile, and accelerate their organizational performance
to seize the most attractive opportunities. Oliver Wyman is a business of Marsh &
McLennan Companies [NYSE: MMC]. For more information, visit
www.oliverwyman.com. Follow Oliver
Wyman on Twitter @OliverWyman.
1 Based on disclosed emissions reduction target
data analyzed by CDP and weighted by total emissions, using the CDP
temperature ratings dataset.
2 Under 10% of companies, weighted by the amount
they borrow from banks.
3 https://sciencebasedtargets.org/
4 The potential scenarios modelled suggest that to
reach the 1.5°C target, a minimum of 65% of European companies
would need to have targets in line with at least well-below 2 °C,
and 30% would require 1.5°C targets. This compares to today's 8%
and 7% figures.
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