As the COP27 climate conference gets underway, the latest MSCI Net-Zero Tracker reveals that listed companies continue to exceed their climate budgets, reducing the time available to avert a 1.5°C temperature rise.
According to the latest data, listed companies will deplete their share of the global emissions budget for limiting temperature rise to 1.5°C by December 2026, two months earlier than was previously estimated in the Q2 2022 Net-Zero Tracker.
The Net-Zero Tracker published by MSCI, a leading provider of critical decision support tools and services for the global investment community, revealed that listed companies are on track to emit 10.9 gigatons* of direct Scope 1 greenhouse gas emissions into the atmosphere this year. This is up 1% from 2021, but down 4.4% from their pre-pandemic high. At this rate, listed companies are on track to make the world 2.9°C warmer by the end of the century, significantly missing the Paris Agreement targets.
The decarbonisation investor challenge
With only over a third (36%) of listed companies having set a decarbonization target and less than half (46%) declaring a net-zero target, the report from MSCI highlights the challenge investors face to align their strategies and portfolios with a 1.5°C decarbonisation pathway.
This is further complicated as self-declared corporate net-zero targets vary broadly. Analysis from MSCI shows some targets aim to balance carbon emissions with carbon removal, while others plan to reduce direct emissions but not from the company’s suppliers or customers. On the other hand, some intend to simply boost the company’s use of energy from renewable sources.
Only 41 listed companies in the Net-Zero Tracker – a quarterly gauge of 9,300 public companies’ climate change progress based on the MSCI All Country World Investable Market Index (ACWI IMI) – have set a net-zero target approved by the Science Based Targets initiative (SBTi). While 577 companies have committed to set one in the future.
Sylvain Vanston, Executive Director, Climate Change Investment Research, MSCI, comments: “The MSCI Net-Zero Tracker shows that 1.5°C waits for no one and our analysis reveals that not all targets are equal. With major inconsistencies across all sectors and regions, investors are presented with a major challenge at a crucial point where transparency of data is critical.
“While investors need to hold companies accountable, the full burden of the net-zero transition cannot fall solely onto them. Policymakers need to set mandatory reporting of climate data that is consistent across the globe, enabling investors to then drive significant action.”