The climate rating for actively managed and exchange traded funds, Climetrics, has advanced its methodology by scoring funds for investing in companies with public commitments to science-based targets.

Climetrics' 1-5 leaf ratings give investors wide-ranging transparency on the climate impact of funds and a simple view of a fund’s exposure to climate risks. Top-rated funds can be found for free on climetrics-rating.org.

The rating is based on three parts: a fund's portfolio holdings, its investment policy, and asset manager governance.

The climate performance of a fund’s portfolio is a key part of its overall Climetrics rating. Investee companies are scored on their current carbon emissions, exposure to fossil fuels and use of clean technology, and their future strategies for managing long-term climate and deforestation risks.

Climetrics, which is backed by global environmental non-profit CDP, and ISS-Ethix Climate Solutions, now calculates scores for funds investing in companies with either approved science-based emission reduction targets or those committed to doing so.

The number of funds rated by Climetrics has also grown to approximately 3700, covering 30% of all assets invested in mutual funds in Europe representing close to €3 trillion AuM. Around 9% of funds have a 5-leaf rating.

The major update to the rating comes as the financial system in Europe undergoes a major sustainability shift led by the European Commission’s new Action Plan for Sustainable Finance. The EU has said that €180 billion in additional sustainable investments are needed to achieve its emissions targets.

In total, more than 370 companies have now joined the SBTi (Science Based Targets Initiative), at a rate of more than two companies per week since its launch in mid-2015 in the run-up to the Paris Climate Change Conference. Europe has more than half of all companies, globally, with approved SBTs.

Momentum behind science-based target setting is expected to grow further in 2018. According data from CDP, which powers Climetrics, 1,200 companies have signalled their intention to set science-based targets by 2019.

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