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Nov 03, 2022

Listed companies fail to meet climate budgets, says MSCI

Only 16 percent of firms align with keeping global warming at or below 1.5°C threshold

Listed companies are on track to make the planet 2.9°C warmer by 2100, as just one third of firms have measures in place to achieve or fall below the 2°C target set by the Paris agreement in 2015.

A new net-zero tracker report by MSCI, following the progress made by the world’s listed companies toward tackling climate change risks, reveals that more than 50 percent of businesses align with future temperatures of more than 2°C.

MSCI reportIn addition, ‘listed companies would deplete their share of the global emissions budget for limiting temperature rise to 1.5°C by December 31, 2026, based on their emissions as of August 31, 2022,’ the report notes. That’s two months earlier than MSCI estimated earlier this year.

With just a few days to go until the COP27 climate summit in Egypt, the research also finds that 36 percent of companies have set a decarbonization target and 46 percent have declared a net-zero target.

Investor struggles  

For MSCI, these results highlight the challenge investors face to align their strategies and portfolios with a 1.5°C decarbonization pathway. One of the challenges is due to the lack of standardization in setting corporate net-zero targets and disclosures, which is what investors expect from companies before investing in them.

Corporate net-zero targets can be achieved in different ways and ‘self-declared’ corporate targets ‘vary broadly’, as the report points out. For example, some companies balance out carbon emissions with carbon removal, while others plan cuts on direct emissions but not those of their suppliers or customers. Others still take advantage of renewable sources.

‘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,’ says Sylvain Vanston, executive director of climate investment research at MSCI.

‘While investors need to hold companies accountable, the full burden of the net-zero transition cannot fall solely on them. Policymakers need to set mandatory reporting of climate data that is consistent across the globe, enabling investors to then drive significant action.’