The points-based system will be able to measure the progress companies are making in their decarbonisation goals, and help them maintain transparency in their emissions impact. Currently, it is an uphill challenge to determine whether businesses are staying true to their carbon reduction targets due to dishonest reporting of ESG ratings.

Research conducted by Scientific Beta revealed that companies with high ESG ratings do not emit notably less carbon that lower ESG rated companies, meaning that relying on ESG ratings to determine a company’s commitment to lowering their emissions is no longer an accurate approach.

Greenly’s climate rating system, in contrast, involves a detailed examination of greenhouse gas emissions, strategies, and green projects undertaken by businesses to ensure transparency and monitor a company’s climate trajectory.

CEO and co-founder of Greenly, Alexis Normand, commented: “We are not on track with the Paris Agreement objectives for decarbonisation. As investors seek to finance the energy transition, and businesses seek to maintain their relevance in a climate-conscious world, they face a dilemma: prioritise real carbon reduction, or simply pursue a high ESG score. These two goals can often be incompatible, so it’s essential to distinguish between a genuine decarbonisation effort and a mere ESG display. Our Climate Ratings System sets out to do exactly this.”

After assessing the company by allocating points for several categories, including creating greenhouse gas reports, setting goals aligned with the Paris Agreement, and offsetting remaining emissions, the system ranks the company performance, ranging from E to A+. When receiving above a C, the business is awarded a medal, which range from bronze to platinum.

Companies that have received Greenly’s Climate Action Medal include Pomelo, share(d), and Exaprobe.