Investors Need Better Climate Data to Hit Net Zero

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by KnowESG
KnowESG_Investors Need Better Climate Data to Hit Net Zero
Image courtesy of Freepik

A new report has emerged, focusing on addressing the informational gaps necessary for investors to effectively uphold their commitments to achieving net-zero emissions.

The Principles for Responsible Investment (PRI) has unveiled this comprehensive report, backed by Chronos Sustainability, which meticulously examines the climate-related data essential for investors to make well-informed decisions and actively engage with their investment portfolios.

This report delves into what investors must be aware of to materialise their net-zero pledges, evaluates the existing landscape of climate data in terms of quality and coverage, and outlines steps required to construct a robust data ecosystem.

Within the report lie three overarching recommendations designed to shed light on the discord between investors' requirements and the current market offerings:

Enhancing Corporate Disclosure

Improving corporate disclosure is a fundamental step toward enhancing the quality and extent of available data products. Corporate data forms the backbone of most existing data offerings.

Elevating the Quality and Coverage of Products

Data providers need to elevate their coverage, transparency, forward-looking climate data analysis, metrics, and methodologies at the portfolio level.

Promoting Data Comparability

To establish common definitions and consensus on sector and geographic pathways, broader consensus-building efforts are imperative. These endeavours will eventually bolster the development of data products.

René van Merrienboer, PRI's Director for Sustainable Systems, expressed that the report's findings illuminate the existing disparities between investors' need for high-calibre climate data and the available data resources.

The report underscores the necessity for improved coverage and quality of climate data to fulfill net-zero commitments. Additionally, convergence across the sector on common definitions and transition pathways will be vital for strengthening the climate data ecosystem.

The report builds on prior literature by undertaking a detailed analysis of investors' specific requirements. This analysis was complemented by a comprehensive research process, encompassing:

  • An examination of the criteria of 17 major investor-led net-zero and similar climate change frameworks and initiatives.

  • A review of 62 climate data products from 19 data providers.

  • Interviews with 16 institutional investors worldwide to gauge their climate data needs.

The three recommendations are subsequently delineated across several themes:

Improving Corporate Disclosure

This theme emphasises the necessity for standard-setters and regulators to introduce mandatory climate disclosure for companies. Such regulations should encompass a range of disclosure requirements, including emissions breakdown, industry metrics, and transition plans.

Enhancing the Coverage and Quality of Products

This theme underscores the importance of expanding the coverage of data products, enhancing data provider transparency, analysing forward-looking company climate data, and developing portfolio-level metrics and methodologies.

Facilitating Data Comparability

This theme highlights the significance of adopting common definitions and agreeing on sector and geographic pathways to promote data comparability and alignment.

In conclusion, the PRI report provides a vital roadmap for closing the information gap that hinders investors from achieving their net-zero commitments. It underscores the imperative need for more robust climate data, improved corporate disclosure, and data comparability to steer the investment industry toward a sustainable, low-carbon future.

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Source: PRI

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