By using the SDS to assess companies and establish climate stress tests, investors and financial institutions underestimate the transition risks associated with these companies.
Financial institutions and governments that are shareholders in the IEA, including France, must join efforts to demand the agency develop a realistic 1.5°C scenario, with a precautionary approach to negative emissions technologies. A 1.5ºC scenario must be the central reference for the World Energy Outlook.
In April 2019 and in May 2020, a large group of investors representing more than $33 trillion assets under management called on the IEA to adopt a 1.5ºC. According to signatories, this scenario should also include a reasonable probability—66%—of limiting warming to 1.5°C and a longer time horizon – beyond 2040.
Unfortunately, not a single French financial institution took part in this initiative—ironic given the IEA is based in Paris.
The silence of French financial institutions is even more problematic, as many, including Société Générale, are quick to refer to IEA scenarios to justify their climate inaction and massive financial services to fossil fuels.