1. Across all three data providers, very few companies in global indices have a temperature score below 2°C
The data providers considered in this paper use their own data sets and methodologies. Consequently, companies’ temperature scores can differ to a sizeable extent depending on the provider. In this section, we focus on the metrics produced by Iceberg Data Lab. According to this data, less than 5% of companies have a temperature score below 2°C across all investment universes, with reference to the MSCI World index. This share is even lower (3%) when considering the ICE BofA large cap index. In both cases, a significant share of companies have temperature scores ranging from 2.5°C to 3.5°C. The ‘NA’ column includes issuers that have not disclosed any emission reduction targets and that, as a result, are not in the scope of Iceberg Data Lab’s methodology.
Less than 5% of companies have a temperature score below 2°C across all investment universes.
At this stage, it appears difficult to build investment portfolios uniquely made up of corporates that are already aligned to a 2°C trajectory and moving towards 1.5°C.
Differences between credit and equity temperature levels on similar universes lie in the differences between benchmarks, not in the issuer’s temperature scores (i.e., corporate x stocks and corporate x bonds have the same temperature score). At this stage, it appears difficult to build investment portfolios uniquely made up of companies that are already aligned to a 2°C trajectory and moving towards 1.5°C. Moreover, only a handful have taken pledges to reduce their carbon emissions to limit global warming to 2°C or below. This is despite the risk of having stranded assets due to efforts to decarbonise the economy. Pioneering companies have taken the lead in the zerocarbon transition by setting emissions reduction targets grounded in climate science through the Science Based Targets initiative (SBTi). Targets are considered to be ‘science-based’ if they are aligned with emission levels consistent with limiting global warming to well below 2°C above pre-industrial levels and towards 1.5°C. To take part in such a global effort, large asset managers have started to develop robust engagement strategies encouraging companies to set more ambitious targets in line with the Paris Agreement’s goal. In practice, this can be done in different ways through continuous and collective engagement with issuers.
2. The distribution of temperature scores varies across geographies
Temperature metrics also hinge on the regions considered. Focusing on results provided by Iceberg Data Lab, the worst performer of all equity universes is US equity, with 75% of corporates being above the 3°C threshold. This is followed by emerging markets (EM) equity and European equity, where the share of companies with a temperature above 3°C is 69% and 42%, respectively. Two main reasons can explain the differences across regions:
- European companies are leading the charge in their efforts to reduce their carbon footprint. In contrast, US corporates have generally been slower to acknowledge the inevitability of transition and to announce ambitious emission reduction goals.
- Temperature methodologies rely on a single global scenario for sectoral pathways, which means that the demanded level of ambition is the same across regions. This does not account for discrepancies in the maturity of issuers and countries across geographies.
Additionally, a significant share -- worth around 10% -- of the MSCI EM index is not covered by Iceberg Data Lab’s methodology. This can be explained by the fact that EM issuers are lagging behind their European and US peers when it comes to climate disclosure and reporting practices, as well as the fact that providers tend to focus on advanced economies first. Both the availability and quality of information relating to carbon emissions tend to be lower for EM issuers, making it more difficult for data providers to assess the companies’ temperature performance.
To take part in such a global effort, large asset managers have started to develop robust engagement strategies, encouraging companies to set more ambitious targets in line with the Paris Agreement goal.
European companies are leading the charge in their efforts to reduce their carbon footprint. In contrast, US corporates have generally been slower to acknowledge the inevitability of transition and to announce ambitious emission reduction goals.
Within the US equity universe, only 2% of companies have a temperature score below 2°C, while 84% of them follow a 2.5-3.5°C trajectory. Considering the MSCI European equity index, 5% of the universe has a temperature score below 2°C, while 70% of companies sit in the 2.5-3.5°C range. Across the MSCI EM equity universe, only 1% of companies lie below the 2°C threshold, while almost 80% have a temperature score between 2.5°C and 3.5°C.
3. Sector-based analysis also indicates notable temperature discrepancies across industries
Another way to compare temperature scores across geographies is to look at sector scores. This can be done, for instance, by comparing the European utility sector to US utility companies. Again, the picture remains similar across sectors: European companies tend to outperform their US peers. An important feature to highlight when comparing temperature scores across geographies is that they all rely on the IEA’s global sector trajectories. However, the IEA also provides regional sector trajectories, which are more stringent for European companies, given they are at a more advanced stage. Were these regional sector trajectories used to compute temperature scores, the differences between regions would probably be less apparent.

Figure 4 shows the share of corporates that are below the 2°C target within each sector, according to Iceberg Data Lab’s methodology. While the amounts remain low overall, some of them fare significantly better than others. Utilities, industrials and consumer discretionary are the best-performing sectors, with over 10% of corporates aligned with the Paris Agreement goals, while real estate, healthcare, financials and communication have no firms below the 2°C target. Similar results can be observed in a global credit universe using Iceberg Data Lab’s methodology.
Utilities, industrials and consumer discretionary are the best-performing sectors, with over 10% of corporates aligned with the Paris Agreement goals, while real estate, healthcare, financials and communication have no firms below the 2°C target.

4. Analysing the distribution of temperature scores within investment universes, rather than the score of an aggregated portfolio, is an efficient way for investors to interpret these metrics
A portfolio’s aggregate temperature score may not reveal its true climate performance. For instance, while the overall score of a portfolio can be low, some of its holdings may have a temperature score much higher than the 2°C threshold. In addition, an aggregated portfolio score does not take into account the fact that the reduction of greenhouse gas emissions in a given sector may be much more impactful than in another one. For instance, a score of 2°C within an energy portfolio is much more significant than the same score in a healthcare portfolio, given the challenges faced by the former to transition to a more sustainable economic model.
Overall, these variations are not properly represented by the single-weighted average temperature score of an aggregated portfolio. As a result, focusing on the distribution of scores might be a more efficient way for investors seeking to decarbonise their portfolios. Ultimately, this technique will facilitate active engagement, allowing portfolio managers to identify and target those companies that are aligned to a 2°C trajectory and, as such, are in a position to manage the energy transition and extract value from this.
Rather than being used on their own, temperature scores should be considered alongside a broader set of criteria to assess a company’s alignment with climate goals.
5. Methodologies to compute temperature metrics are under development and could evolve further
Temperature scores have only been developed recently and data providers are reassessing their methodologies to enhance the scores’ relevance and applicability. Rather than being used on their own, they should be considered alongside a broader set of criteria to assess a company’s alignment with climate goals. For asset managers, it is paramount that sufficient resource is utilised to assess fully this methodology and its broader application.