According to the International Energy Agency (IEA), achieving net zero will require clean energy investments of $4.5 trillion over the next decade. This is more than double the amount being invested in clean energy today.
The latest edition of the MSCI Net-Zero Tracker, a “periodic report on progress by the world’s listed companies toward curbing climate change risk,” explored trends reshaping the investment landscape, from renewable energy adoption to corporate climate commitments and the evolving voluntary carbon market.
Here are some of the report’s key findings regarding corporate climate progress.
Corporate Climate Progress
MSCI’s analysis reveals an encouraging trend in corporate climate commitments. Notably, 20% of listed companies have adopted science-based targets aligning with a 1.5°C temperature rise by 2050, marking an 8% increase from the previous year.
The percentage of listed companies that have set decarbonization targets aiming for net-zero emissions has also increased compared to a year earlier, albeit by 1%, and now stands at 38%.
However, challenges persist, with only 52% of listed companies disclosing emissions reduction commitments.
Disclosure and Emissions Reduction
The report highlights a significant improvement in emissions disclosure, with nearly 60% of listed companies globally now disclosing their Scope 1 and/or Scope 2 emissions. This marks a 16% increase compared to two years ago.
When it comes to Scope 3 emissions, almost 42% of listed companies are now reporting “at least some of them” — 17% more than two years prior.
However, the MSCI’s Net-Zero Tracker also reveals a worrying gap, regarding Scope 1 and 2 carbon emissions, between US-listed companies and those in developed markets around the world:
“Less than half (45%) of U.S.-listed companies disclosed their Scope 1 and 2 carbon emissions […] compared with nearly three-quarters (73%) of listed companies in developed markets globally.”
The recent climate disclosure rules finalized by the U.S. Securities and Exchange Commission (SEC) could play a crucial role in narrowing this gap, the report authors note.
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Urgency of Action
Despite progress in corporate climate commitments, the report projects that listed companies will exhaust their share of the global carbon budget for limiting temperature rise to 1.5°C by July 2026 already.
As the report warns, listed companies’ current decarbonization trajectories “place them on a path to warm the planet by 3°C (5.4°F) above pre-industrial levels this century, roughly double the 1.5°C threshold that science indicates would prevent the worst effects of global warming.”
Only 11% of listed companies are aligned with limiting global warming to 1.5°C, the report found, while 38% are on the path to constraining it to 2°C or below.
And, despite more listed companies disclosing their climate commitments compared to last year, these listed companies are projected to generate “roughly the same amount” of Scope 1 GHG emissions as in 2023 — “nearly one-fifth of global GHG emissions.”
In conclusion, while progress has been made in terms of commitments, concerted efforts are needed from policymakers, investors, and corporations to navigate the challenges and opportunities of a greener economy while averting the worst impacts of climate change.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — Cover Photo Credit: Yahima Hernandez Cruz.
