Investing

What a company’s Implied Temperature Rise can - and can't - tell investors

David Callaway

Published: July 20, 2023 4:32 am

Last Updated: July 20, 2023 10:33 am

(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — Climate data providers now report the temperature rise that is implied by a company’s greenhouse gas emissions.

This would appear to be a huge step forward, especially with heat records being broken almost daily around the globe. The temperature rise implied by each company’s operations would, finally, allow you to construct a portfolio that is consistent with the Paris Agreement’s objective of limiting global warming growth to 1.5°C. or 2.0°C.

I say “finally” because up until now the investment tools available to climate-focused investors have shed more heat than light. There is such wide disagreement between different ESG rating agencies that many just throw up their hands. Take the iShares ESG Aware MSCI USA ETF $ESGU , which is one of the largest ESG-focused exchange-traded funds; according to the iShares website, the ETF focuses on “U.S. companies that have positive environmental, social and governance characteristics.” One of this ETF’s biggest holdings is ExxonMobil $XOM .

Unfortunately, according to new research, the Implied Temperature Rise (ITR) data aren’t any more consistent than the ESG data…

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