From policy to portfolio: What climate pledges can tell investors about future risk – and opportunity

As national climate pledges evolve, so too must the way investors interpret them. While national plans may seem slow-moving or incomplete, they contain powerful signals about future economic direction and climate risk – if you know where to look.

Earlier this year, the deadline passed for countries to submit their updated 2035 emissions targets – the so-called “NDC 3.0s” – under the Paris Agreement. Yet only 13 of the 195 signatories met the deadline to submit these nationally determined contributions. While missed deadlines are not uncommon in the Paris Agreement process, this round of updates landed with far less urgency or political fanfare. With policymakers preoccupied by war, inflation and geopolitics, climate has slipped down the international agenda.

But the physical and economic realities of climate change remain. Extreme weather events are becoming more costly and frequent. And the energy transition – despite varying levels of government support – continues to reshape global markets through technological, regulatory and financial momentum.

For investors, the climate signals embedded in national pledges and policies matter more than ever. Investors are demanding more information about their implications at sovereign, sector and company levels.  Such information requires detailed, forward-looking analysis. At LSEG, we’re working to meet that need.

LSEG’s data, models and research help investors interpret the intent and feasibility behind national climate commitments. Our latest Net Zero Atlas, released ahead of COP29, combines emissions targets with sovereign-level decarbonisation pathways to show how national commitments align, or not, with a well-below 2°C future.

We do this by tracking each target submission, and assessing its climate alignment using our Implied Temperature Rise (ITR) model^[1]. The ITR framework estimates how a country’s pledges and current policies translate into long-term temperature outcomes, by comparing their projected emissions to their share of a 1.5°C-compatible carbon budget.

So far, just 20 updated NDCs have been submitted. Some, like the UK’s, remain aligned with the Paris Agreement’s 1.5°C ambition. Others point to trajectories well above 2°C^[2].

In addition to 2035 targets, long-term commitments offer another important lens. LSEG has developed a global dataset of sovereign pledges, identifying over 100 countries that have announced long-term climate goals. Of these, 81 target net-zero emissions by 2050. Some aim earlier (e.g. Germany, 2045) and others later (e.g. China, 2060; India, 2070).^[3]

Significantly, our dataset quantifies the coverage and scope of these targets, showing whether they are backed by law or merely publicly pledged, and what gases are included. While 78 countries aim for net zero across all greenhouse gases, others are more limited. For example, China’s target only covers CO₂, which accounts for roughly 80% of its current emissions. That gap matters for investors trying to understand future mitigation risk or transition exposure.

As the Institutional Investors Group on Climate Change has pointed out, many national plans are not yet “investor-grade.”^[4] To be decision-useful, climate pledges must offer more clarity on policy frameworks, sectoral pathways and capital needs.

To that end, LSEG’s tools go beyond headline targets and track:

• The shape of decarbonisation: Net-zero goals often lack interim milestones between 2030 and 2050. Since climate change is driven by cumulative emissions, delayed action may lead to higher temperatures. Understanding the front-loading or back-loading of emission cuts is critical.
• Legal enforceability: NDCs by themselves are voluntary. But if long-term targets are enshrined in law – rather than stated in policy documents – they are more likely to translate into real-world outcomes. 
• Gas coverage: Not all countries include all seven major GHGs (CO₂, CH₄, N₂O, HFCs, PFCs, SF₆, NF₃). Knowing which gases are covered helps quantify the true scope of a target.
• Financing dependencies: Developing countries often include ‘conditional’ targets that depend on receiving international climate finance. With donor support under strain, these targets may be difficult to achieve without additional resources or market mechanisms.

Investors are becoming increasingly sophisticated in their examination of climate risk and opportunity, and as they consider how sovereign commitments filter down into national policy and the outlook for industry sectors and individual companies. Our data and research can help ensure they have the tools they need to inform investment decision making as the climate policy landscape continues to evolve.

[1] See page 109 of the COP29 Net Zero Atlas for the ITR methodology.

[2] Our NDC 3.0 Tracker, analyses each 2035 target as they are announced using our Implied Temperature Rise (ITR) framework.

[3] Correct as of 16^th May 2025. 

[4] IIGCC, Making NDCs investable – the investor perspective, 2024 [IIGCC].

* More analysis from LSEG’s sustainable investment experts can be found in our Insights pages here. Alternatively, if you are a Workspace user, find our analysis on the Research and Insights app.