New report examines alignment of Japanese equity market with the 2°C climate goal
- Japanese market falling short of Paris Climate Agreement –
28 February 2018
On 28 February 2018, a new report will be launched that analyses the alignment of the Japanese stock market with the Paris Agreement on climate change.
【SUMMARY OF THE REPORT】
This report compares the energy and technology exposure of the Tokyo Stock Price Index (TOPIX) with the 2℃ roadmap of the International Energy Agency (IEA). The analysis is based on a translation of this climate scenario into “2℃ benchmarks” for investment portfolios, focusing on a 5-year window: 2016-2021. A 2℃ portfolio for TOPIX represents the relative amount of energy/technology which TOPIX companies should produce/use to achieve the 2℃ target under the IEA 2℃ scenario.
The sector coverage represents only 25% of TOPIX market capitalisation, but we estimate that it covers most of its carbon footprint (about 70-90%).
Since the above three sectors are among the most climate change concerned sectors (they typically account for most of the TOPIX carbon footprint), their misalignment with the average production and capacity required by the 2℃ scenario means that the TOPIX index, as a whole, seems to be incompatible with a 2℃ climate goal.
As a consequence, financial institutions that invest in the Japanese economy through Japanese listed companies are not aligned with such goals, and are contributing to driving global climate towards dangerous tipping points by overshooting the 2℃ threshold.
【ABOUT 2° INVESTING INITIATIVE】
The 2° Investing Initiative [2° ii] is a multi-stakeholder think tank working to align the financial sector with 2℃ climate goals. Their research work seeks to align the investment processes of financial institutions with climate goals; develop the metrics and tools needed to measure the climate friendliness of financial institutions; and mobilise regulatory and policy incentives to shift capital to energy transition financing. The association was founded in 2012 and has offices in Paris, London, Berlin and New York City.
2° ii’s research is provided free of charge and 2° ii does not seek any direct or indirect financial compensation for its research.