Priced for a cooler world, built on unchecked numbers

The UN now says breaching 1.5°C is unavoidable. Markets are still priced for a cooler world, and the climate numbers investors rely on are mostly unchecked. That is two mispricings stacked on top of each other, heading into COP31.

The number markets will not price

This month the UN said out loud what markets still will not price. Its Emissions Gap Report puts current policies on track for 2.8°C of warming this century. Even if every country delivered every pledge, we get 2.6°C. For the first time, UNEP calls breaching 1.5°C unavoidable.

Yet most assets are still priced as if we are on a 1.5–2°C path. And the data meant to tell us which companies are ready for a hotter world has, in most cases, never been properly checked. Investors are flying with the wrong map and an uncalibrated instrument panel.

Overshoot is now the base case

The gap is not small. Staying on the lowest overshoot path needs emissions 18% below 2025 levels by 2030, 45% by 2035 and 69% by 2040. That is a cut of 5.7% a year. Full delivery of today’s pledges gives 5–8% by 2030 and 11–15% by 2035.

The best case is now an overshoot. Warming peaks at 1.7–1.8°C around mid-century. It returns to 1.5°C by 2100 only if about 320 gigatonnes of CO₂ are pulled out of the air and stored. That is eight years of today’s emissions.

The clock matters too. UNEP estimates that every five years of CO₂ at today’s level adds about 0.1°C to peak warming. Delay does not remove policy risk. It raises the odds that policy arrives later, and abruptly.

And who checks the numbers?

If markets are to reprice for 2.8°C, they will do it using company climate data. So the next question is simple: who has checked that data?

Ten years after Mark Carney warned of a ‘climate Minsky moment’, the debate is still about how much companies disclose, not whether anyone verified it. Among the 1,400 largest listed companies in G20 markets, 75% had some sustainability data assured in 2024. But assuring a single metric counts. Across 56,565 reports from 14,512 companies, only 42.9% carried any assurance statement at all.

Most of that assurance is light. Of the reports where the level could be read, 88.6% got only limited assurance: the assurer says nothing came to its attention, mostly after asking questions. Just 8.7% got reasonable assurance, the standard we expect for financial statements. That is roughly 4% of the whole sample.

The data least likely to be checked is exactly what a 2.8°C world makes most important: Scope 3 emissions, transition plans and targets, forward-looking data, and the systems behind the numbers.

Where the two gaps meet in portfolios

Put the two together and the risk compounds. Capital is allocated for the wrong temperature, using numbers no one has verified. Here is where I expect it to show up first.

• Insurance. The canary. Repricing and withdrawal from high-risk regions are where climate first becomes a cash flow.
• Banks and real estate. Uninsurable property becomes unfinanceable property, and banks inherit the risk as collateral without cover.
• AI infrastructure. Data centres need power, cooling and water, all of which get scarcer and dearer on a hotter path.
• Long-life fossil assets. The later and more abrupt the policy response, the larger the repricing.
• Adaptation. Water, flood defence and catastrophe bonds. If overshoot is the base case, adaptation is now an asset class.

Unchecked data adds four risks on top. Mispricing: capital flows to firms that look greener than they are. Liability: claims built on weak data become greenwashing cases; DWS has paid $19 million to the SEC and €25 million in Frankfurt. Restatement: numbers get quietly rewritten later. Contagion: errors spread through every rating, index and model built on them.

The same holds for carbon removal. If 320 gigatonnes must come out of the air, removal moves from niche to necessary, but only if verification holds up.

My take

The question is no longer whether we pass 1.5°C. It is how far we overshoot, which assets are priced for that, and whether the numbers telling us so can be trusted.

A market that adjusts smoothly to numbers it cannot verify has not reduced its risk. It has postponed it, and added a second shock for the day the numbers turn out to be wrong. As COP31 opens, that is the conversation investors should be having.

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