Listed companies failing on climate plans, MSCI says
Just one third of public companies have measures in place to achieve or fall below the 2°C by 2100 target set by the Paris climate agreement meaning that the planet is on track to be 2.9°C warmer by that date, according to MSCI.
A new net-zero tracker report from MSCI, which follows progress made by the world’s listed companies toward tackling climate change, reveals that more than 50 percent of businesses are aligned with future temperature increases of more than 2°C.
In 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 the COP27 climate summit in Egypt starting this week, the research also finds that 36 percent of companies have set a decarbonization target and 46 percent have declared a net-zero target.
For MSCI, these results highlight the challenges investors face in aligning their strategies and portfolios with a 1.5°C decarbonization pathway. One of the difficulties is 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’, 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.’