MSCI has announced the launch of its Implied Temperature Rise investor product.

The product enables investors to track how companies in their investment portfolios are aligning with global temperature targets. It will cover nearly 10,000 publicly listed companies based on the MSCI ACWI Investable Market Index. Used alongside MSCI’s Target Scorecard, the product aims to help investors strengthen their engagement on climate risk and navigate the transition to a net-zero world.

To enable investors to analyze the pace at which the companies they invest in are transitioning their businesses to meet their climate goals, the product captures benchmarks such as the 2°C target, referring to the Intergovernmental Panel on Climate Change’s goal, or the 1.5°C limit, popularized through the Paris Agreement.

MSCI’s Temperature Rise solution converts the current and projected greenhouse gas emissions, taking into consideration emissions reduction targets, of each company to an estimated rise in global temperature. Projections are calculated by comparing those projected emissions with the global carbon budget that remains if the planet is to keep temperature rise this century below 2°C, a benchmark also linked to MSCI’s quarterly Net-Zero Tracker.

The Temperature Rise solution has been modelled to meet the design recommendations set out by the TCFD Portfolio Alignment Team for all segments of the financial sector to measure and disclose temperature alignment of portfolios as well as target-setting frameworks.

Remy Briand, Global Head of ESG and Climate at MSCI, said: “Climate change is the greatest challenge of our time and capital markets participants are critical to driving the systemic transformation needed to avert climate catastrophe. The Implied Temperature Rise metric is an important addition to our evolving suite of climate investing tools and builds on MSCI’s mission to ensure capital markets and its participants can drive the transition to net-zero. Investors are rapidly sharpening their focus on the financial impacts of climate change, and they need greater transparency and insight on whether their capital may further, or frustrate, the goal of a more sustainable society. With its convenient measure for forward-looking portfolio emission trajectory, investors can use Implied Temperature Rise as a versatile tool to set decarbonization targets and strengthen engagement on climate risk.”