Experts warn 2024 could take us into uncharted climate territory, pushing temperature rises beyond the threshold of 1.5 degrees Celsius. These stakes demand one thing: there must be no more COPs where corporate emissions, as the main driver of the climate crises, are not meaningfully addressed.

Oil and gas majors remain the biggest offenders, but COP28 showed that the crucial and slow work of international conventions are, once again, falling short of what’s needed. The agreement to ‘transition away’ from fossil fuels lacked timelines and teeth. As a result, what was touted as the ‘beginning of the end of fossil fuels’ made zero impact on oil and gas stocks.

This underscores the crucial point that without proper incentives, corporates, including the oil and gas majors, won’t decarbonise by themselves. The scale of this task can only be achieved through the full force of financial markets. But their potential to influence corporate decarbonisation will remain unfulfilled until climate change is viewed not only as an environmental risk, but also a financial one that will hit bottom lines.

As Mark Carney pointed out in his renowned "Tragedy of the Horizon" speech back in 2015, financial markets were never geared to measure the risks of a climate crisis. Their inherent focus on financial performance and risk, revolving around quarterly and annual reporting periods, are not equipped for the consistent and long-term efforts to abate an ongoing and worsening climate disaster.

The mechanisms in financial markets are skewing how we interpret the real and lasting dangers. Here’s the glaring truth: catastrophic climate tipping points, and their devastating domino effects, including the loss of ecosystems, mass displacement and political instability, rank among our greatest financial threats.

For financial markets to read this, we need a new way of thinking, and a bigger picture that sees how everything's linked. But neither of these things can be achieved if we don’t have the data that connects these dots.

The issues holding back sustainable finance are threefold: insufficient disclosure of corporate emissions data, a lack of demand for it by markets, and the current focus by those who are demanding it on the wrong information. Simply put, investors aren’t asking enough questions to drive behavioural change, and when they do, they’re often the wrong ones.

Take the example, again, of oil and gas. So called green funds are running at the first sight of high emissions, rewarding only tech giants or genuinely sustainable but unscalable companies. But if anything, our future depends on markets rewarding and funding high-emitting companies that are decarbonising at pace. This can only result from the disclosure and the demand of metrics such as decarbonisation rates.

Halfway between 2015’s landmark Paris Accord and the crucial 2030 emissions reduction target, progress is alarmingly off course. Consider this: last year, the 1,000 highest-emitting companies generated 25 gigatons of emissions, significantly overshooting the 22 gigatons reduction by 2030 acknowledged by COP28’s hosts.

The world urgently needs a strategic approach encompassing comprehensive emissions reporting, an insistent market demand for the correct data, and the capacity to analyse and act upon this data effectively.

‘Ask me no questions and I’ll tell you no lies’ has prevailed for years when it comes to ESG data. Only 27% of companies comprehensively report their production and supply chain emissions – known as Scope 3 – which can constitute up to 80% of their total emissions. Only a fifth of companies align with a Net Zero scenario, and 90% of companies with science-based emission reduction targets are not on track to meet them.

Why are investors failing to punish this behaviour, which after all is often counterproductive to long-term profitability? The root of the problem lies in their limited visibility. Investors often overlook the broader impact of companies’ supply chains and their product and service emissions.

Over 80% of total emissions for most companies stem from these overlooked areas, yet only 33% of companies disclose these crucial Scope 3 emissions. The result is a market distorted by Scopes 1 and 2 – direct emissions, or indirect emissions resulting from purchased energy – often leading to the wrong companies being rewarded.

Beyond COP28, we must push for markets which focus on the three ‘D’s. First, disclosure: comprehensive emissions reporting from companies. Second, demand: for markets to recognise and request this most pertinent data. Last, diagnostics: the ability to act upon the data so companies can fulfil their decarbonisation potential and markets can reward those that do.

The technology now exists for companies to easily rationalise the sustainability data stakeholders need to know, while interpreting this data to uncover how they compare to industry peers and the areas they need to improve on. The same technology equips investors to understand the same of their assets, and reach out directly to companies for sustainability information in real time, free from the constraints of the annual reporting cycle.

Financial markets hold immense power as a catalyst for decarbonisation across the economy. We can’t rely on once-a-year debates among public leaders to make meaningful headway harnessing private sector actors. Investors, companies and regulators need to drive this change themselves.

The tide is turning. The International Sustainability Standards Board (ISSB), the Corporate Sustainability Reporting Directive (CSRD), and Transition Plan Workforce are part of a global movement driving transparency and levelling the playing field – crucial for our more accountable, sustainable future.

We must be doing more, and with today's advanced tools, there is no justification for inaction. It's time to comprehensively apply these tools, not only to encourage but to demand accountability in decarbonisation efforts. The potential is immense; the world cannot survive for much longer unless we fully harness it.