ITR Intro

As investors sharpen their focus on the financial impacts of climate change, they may want to know whether the companies they are investing in today align with the global goal of keeping average temperature rise this century to well below 2 degrees Celsius (2°C) to prevent the worst effects of warming.1


What is Implied Temperature Rise?

What is Implied Temperature Rise?

Implied Temperature Rise from MSCI ESG Research is designed to show the temperature alignment of companies, portfolios and funds with global climate targets.

With this forward-looking estimate for company or portfolio alignment, investors can use Implied Temperature Rise to set decarbonization targets and support engagement on climate risk. The measure, which is also designed to support reporting for the Task Force on Climate-related Financial Disclosures (TCFD), is part of a platform of analytical tools from MSCI ESG Research that institutional investors trust to navigate the transition to net-zero at every stage.

 

 


Implied Temperature Rise

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Implied Temperature Rise

Helping investors navigate the transition to net-zero at every turn.

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How Implied Temperature Rise works?

How Implied Temperature Rise works

Implied Temperature Rise compares the current and projected greenhouse gas emissions of nearly 10,000 publicly listed companies2 across all emissions scopes (based on the company’s track record and stated reduction targets) with their share of the remaining global carbon budget for keeping warming this century well below 2 degrees Celsius (2°C).3 A company projected to emit carbon below budget can be said to “undershoot” the budget a company projected to exceed the budget “overshoots” it.

Implied Temperature Rise converts the overshoot or undershoot to an implied rise in average global temperatures this century, expressed in degrees Celsius (°C). An implied temperature of 1.5°C, for instance, indicates that a company is projected to remain within its share of a carbon budget that would keep warming this century to 1.5°C. An implied temperature of 2.5°C or 3°C, in contrast, would show that the company’s emissions align with temperatures that keep rising, bringing greater harms.

The portfolio-level Implied Temperature Rise compares the sum of projected greenhouse gas emissions against the sum of carbon budgets for the underlying constituents or holdings. The estimated carbon budget overshoot or undershoot for the portfolio in question converts to a degree of temperature rise.

The graphic shows the steps of modelling the implied temperature rise metric.

 


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Alignment With Global Temperature Targets

LAGGING

Implied Temperature Rise above 3.85oC*

Investments on track for warming that would contribute to a climate disaster.

*BAU / No policy action

MISALIGNED

Implied Temperature Rise between 2oC and 3.85oC

Investments on track for warming that would exceed global climate goals.

2oC ALIGNED

Implied Temperature Rise well below 2oC

Investments align with the global goal of keeping warming well below 2°C this century.

 

Download Methodology     Download Factsheet


 


Key Features

Key Features

 

Easy-to-grasp metric to express portfolio alignment with global temperature targets

 

Covers companies’ Scope 1, 2 and 3 carbon emissions (may include estimates)

 

Available for nearly 10,000 issuers2

 

Forward-looking assessment developed by the MSCI Climate Risk Center

 

Aligned with recommendations published by the TCFD Portfolio Alignment Team4

 

Based on data that can be easily examined and traced, together with analysis of companies’ decarbonization targets

 

Supports TCFD reporting and net-zero strategy implementation

 

Part of MSCI’s net-zero solutions and available via MSCI ESG Manager, MSCI Climate Lab, MSCI Analytics and other platforms


Our Net-Zero Strategy

Our Net-Zero Strategy


Our net-zero strategy

Path to Net-Zero Emissions

Implied Temperature Rise can help investors assess the alignment of companies, portfolios, funds and benchmarks with net-zero targets by the middle of this century.

Target-Setting and Engagement

Investors can use Implied Temperature Rise to inform their climate-risk management, decarbonization targets and portfolio optimization.

Client Communication

Asset and wealth managers can use MSCI’s Implied Temperature Rise to show clients how investment portfolios address climate and sustainability concerns.

Facilitates Reporting

With its coverage of nearly 10,000 issuers and all greenhouse gas emissions scopes, the tool supports reporting in line with evolving disclosure requirements, including the TCFD.5

Our Net-Zero Resources ITR

Our Net-Zero Resources

Implied Temperature Rise is part of a platform of analytical tools that can help make climate considerations part of investment strategies.

Net-Zero Tracker

Gauge the contribution by the world's publicly listed companies to total carbon emissions together with their progress towards a net-zero economy.



Net-Zero Tracker

Climate Target and Commitments Dataset

For untangling corporate decarbonization commitments.


Climate Target and Commitments Dataset

Climate Scenario Analysis

Deep insight into how the physical and transition risks and opportunities of climate change may affect company valuations.


Climate Scenario Analysis


Want to get in touch to find out more?

 

Want to get in touch to find out more?

Please contact our team of climate specialists to learn more about Implied Temperature Rise, our series of net-zero solutions or to discuss your own climate objectives.

Contact Us


ITR Related Cards

ESG Investing footnotes 2

Implied Temperature Rise is provided by MSCI ESG Research LLC. MSCI ESG Indexes and Analytics utilize information from, but are not provided by, MSCI ESG Research LLC. MSCI Indexes and Analytics are products of MSCI Inc. and are administered by MSCI Limited (UK).


ESG Investing footnotes

MSCI ESG Research LLC. is a Registered Investment Adviser under the Investment Adviser Act of 1940. The most recent SEC Form ADV filing, including Form ADV Part 2A, is available on the U.S. SEC’s website at www.adviserinfo.sec.gov.

MIFID2/MIFIR notice: MSCI ESG Research LLC does not distribute or act as an intermediary for financial instruments or structured deposits, nor does it deal on its own account, provide execution services for others or manage client accounts. No MSCI ESG Research product or service supports, promotes or is intended to support or promote any such activity. MSCI ESG Research is an independent provider of ESG data, reports and ratings based on published methodologies and available to clients on a subscription basis.  We do not provide custom or one-off ratings or recommendations of securities or other financial instruments upon request.

ESG ADV 2A
ESG ADV 2B (brochure supplement)


ESG Investing footnotes 3

1The Paris Agreement, United Nations (2015)

2The company-level dataset will cover nearly 10,000 publicly listed companies based on the MSCI ACWI Investable Market Index, as of August 2021

3MSCI uses IPCC (Intergovernmental Panel on Climate Change) guidance to calculate a global 2°C carbon budget: “The IPPC Special Report on Global Warming of 1.5 °C,” sets the remaining global carbon budget for varying temperature rises and probabilities (Table 2,2, at page 108 of the report).

4Measuring Portfolio Alignment: Technical Supplement,” Task Force on Climate-related Financial Disclosures, June 2021.

5The 2020 Measuring Portfolio Alignment Report recommends a TCRE factor of 0.000545°C warming per Gt CO2 which is based on IPCC 2013 The Physical Science Basis report (https://www.tcfdhub.org/wp-content/uploads/2020/10/PAT-Report-20201109-Final.pdf).