European Corporate Emissions Are Running Too ‘Hot,’ Report Says

(Bloomberg) -- For all the talk of tackling climate change and supporting the goals of the Paris climate agreement, European companies are on a path toward catastrophic global warming.

Non-profit CDP Europe and consultancy Oliver Wyman said in a joint report that the level of global warming implied by European businesses' current emissions reductions plans is 2.7 degrees Celsius by 2100. That's almost double the the 2015 Paris Agreement's target of 1.5°C and significantly higher than the 2°C ambition.

Though the Paris accord is a deal made by world leaders to limit global warming, its goals won't be reached without the corporate sector reconsidering how materials and commodities are sourced and how products and services are built and sold. Less than one in 10 companies have emissions targets aligned with Paris's well-below 2°C goal, according to CDP and Oliver Wyman's analysis of almost 1,000 of Europe's biggest companies.

“The European corporate sector is running hot,” Maxfield Weiss, executive director of CDP Europe, said in the report. “We need far more action from corporates and financial institutions to make good on our goals.”

To give a sense of the size of the challenge, CDP and Oliver Wyman found that to cap warming at 1.5°C, Europe's economy should cut emissions by 50% over the next decade. And, at least 65% of the companies would need to be “fully Paris-aligned” by then.

Still, there are some signs of hope. The report found that the 25% of companies that made the most progress on decarbonization reported a 15% drop in emissions last year, equivalent to the annual emissions of the Netherlands. In addition, 56% of companies say they have a transition plan in place and 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.

“The leaders in Europe's corporate sector can decarbonize at ambitious levels: It is possible,” CDP's Weiss said in an interview.

Pushing companies to support the Paris Agreement and start transitioning to net-zero emissions is a critical role that banks and investors can play as the allocators and guardians of capital. Financial-services firms are under growing pressure from regulators and the public to demonstrate how they are helping the world move toward net zero.

CDP and Oliver Wyman found a 4 trillion-euro ($4.8 trillion) mismatch is forming between bank lending that aims to be “Paris-aligned” and the current market for such lending in Europe.

“We need to hasten the pace if we are to hit the Paris targets,” said James Davis, a partner and head of sustainable finance for Europe at Oliver Wyman. “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.”

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