GIM calculated that its estimates are “likely to be conservative”.
Previous estimates have underplayed the true impact that listed companies have on climate change with research confirming they are responsible for 40% of all emissions, a report finds.
A Generation Investment Management (GIM) report published today (11 October) said that while listed companies are responsible for almost half of greenhouse gas emissions, investor clients are critical to changing this.
The Insights 6: Listed Company Emissions report analysed a range of calculations relating to Scope One, Two and Three emissions in its findings to give a fuller picture of the greenhouse gas emissions accountable to listed companies.
Scope One covers direct emissions from owned or controlled sources, while Scope Two covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope Three includes all other indirect emissions that occur in a company's value chain.
Previous estimates of listed companies' environmental impact have only covered the effects of Scope One, GIM noted.
Co-chief investment officer Miguel Nogales said the 40% figure in the findings showed listed companies "are hiding in plain sight".
"Far from being minor players, our analysis shows they are responsible for around 40% of all climate-warming emissions, so of course, this also means that the influence and leverage of the investment community has been underestimated," he said.
Nogales said listed companies would need to deliver "the lion's share" of private sector emissions reductions in the next few years, particularly given their outsized resources and focus on developed markets.
"As COP26 approaches, our research highlights the importance of capital allocation choices and meaningful portfolio engagement if we are to be successful in delivering a net-zero world by 2050," he added.
"If the world needs to get to net zero by 2050, the ambition for public companies overall should be 2040 at the latest."
Even with the additional factors included in its research, GIM calculated that its estimates are "likely to be conservative".
For example, the analysis excluded emissions where double counting was too difficult to address and where sufficient, reliable data was not available from public sources.
Director of sustainability insights Felix Preston said the analysis suggested the findings still show the collective importance of more than 10,000 listed companies globally had been underplayed.
"While investor action on climate change is rightly targeted on the highest emitting and systemically important companies, the rest of the publicly traded universe also has an important role to play," he added. "With the right incentives, these companies can attack emissions reduction from all angles and unleash untold potential for innovation and collaboration. Indeed, this could be an important weapon in driving change in incumbent heavy industries, which are some of the largest Scope One emitters."
Carbon Disclosure Project joint global director of capital markets Claire Elsdon said it was important for investor clients of listed companies to remember they are "critical" to driving corporate change.
"Now more than ever, investors require decisive data that is consistent, comparable and comprehensive. To make this possible and support them in setting and meeting their own net-zero ambitions, they expect companies to fully engage with Taskforce on Climate-related Financial Disclosures-aligned standards on environmental disclosure and have robust science-based targets that drive rapid decarbonization in line with a 1.5°C pathway," she added.
"The tide is turning against companies not taking note of investor demands."
