There has been progress on corporate climate disclosure from listed companies but they are on a path to warm the planet by 2.7° above pre-industrial levels this century, placing them at the high end of the Paris Agreement’s uppermost temperature threshold, according to research from MSCI.
“The climate transition is gaining traction but is nowhere near where it needs to be if society is to avoid the most disruptive warming,” said MSCI. “Carbon emissions hover near all- time highs, and the end of this critical decade for cutting emissions is approaching.”
The MSCI Net-Zero Tracker monitors alignment of the world’s listed companies with limiting the rise in average global temperatures to 1.5°C above pre industrial levels, and counts down the time until the collective carbon budget for world’s listed companies is estimated to be depleted.
One third, 35%, of listed companies disclosed at least some of their Scope 3 emissions in March 2023, up 4% from seven months earlier, according to a report on the MSCI Net-Zero Tracker in May. In addition nearly half, 44%, “of listed companies have set a decarbonization target, an increase of 8% over the same timeframe.
“Companies in the emissions-intensive utilities, real estate, capital goods and automotive industries have the highest revenue exposure to sustainably produced power and clean technologies, suggesting that investors who invest in emissions-intensive industries in the short term may help drive down global carbon emissions over the long term,” said the report.
However, listed companies are still emitting a record amount of carbon, and MSCI projected they will put 11.2 Gt of carbon dioxide equivalent emissions into the atmosphere this year, unchanged from 2022.
MSCI added: “Listed companies would need to reduce their carbon emissions further and faster to avoid the worst effects of a warming planet, based on our latest analysis. Companies’ greenhouse gas emissions and projected emissions trajectories indicate that warming would exceed 1.5°C this century if the whole economy had the same carbon budget overshoot or undershoot as the companies in question.”
Just over half, 51%, of listed companies are on track to keep warming below 2°C, while 19% align with a 1.5°C temperature rise (see graph).
“Investors and other capital-markets participants have a critical role to play in narrowing that gap by using the strategic levers at their disposal to spur companies to reduce emissions in line with the Paris Agreement,” said MSCI. “Investors also may wish to monitor whether their allocation of capital to companies that are decarbonizing shows the desired effect in greening, not only for their own portfolios but also for the global economy.”
©Markets Media Europe 2023
