A new report from the MSCI Net-Zero Tracker reveals that over half of world’s listed companies are set to overshoot a collective carbon budget. This report, a quarterly analysis of 9,300 public companies’ climate change progress, represents the collective change of the world’s listed companies to keep climate change within 1.5 degrees Celsius, illuminating who is slacking and succeeding in reaching their targets and their associated carbon footprints.
Doubts over 1.5°C climate target
The original goal of curbing global emissions to 1.5°C as set in the Paris Agreement could be an ideal of the past, the report suggests. Listed companies are projected to warm the planet to 2.9°C by the end of the century.
Balancing the battle against climate change with the Russia-Ukraine war, global economic inflation, and a post-pandemic era have been difficult for many countries. Only 16% of listed companies are aligned with progress in keeping global warming below 1.5°C, while 51% are projected to exceed 2°C at current emissions rates.
Emissions rates aren’t slowing down, either. By the end of 2022, listed companies are on track to release 10.9 billion tons of greenhouse gas emissions (Scope 1) into the atmosphere. While this number is down by 4.4% since the pre-pandemic high, it has still gone up by 1% since 2021.
Offsetting and meeting investor demands
Companies that make up 64% of global GHG emissions rely on carbon-offsetting to achieve net-zero goals. Most offsets are reliant upon planted forests that absorb CO2 back into the earth – but many of those forests have been subject to damage and destruction both by man and natural causes, like wildfires.
Ideally, companies will start to mitigate their CO2 and GHG emissions via switching to renewable energy sources or CCUS. Although, according to the report, investors more frequently demand that businesses aim for net-zero emissions by 2050 before considering investing.
“While investors need to hold companies accountable, the full burden of the net-zero transition cannot fall solely onto them,” says MCI’s executive director of climate change investment research, Sylvain Vanston. “Policymakers need to set mandatory reporting of climate data that is consistent across the globe, enabling investors to then drive significant action.”
Time to standardise
One of the major issues when reporting, particularly with CO2 and Scope 3 emissions, is the lack of standardised reporting methods and goal setting. The MSCI Tracker revealed a massive range of goals, from balancing carbon emissions with carbon removal to reducing direct emissions, but not those of the company’s suppliers or customers.
Moving forward, action is vital for sustainable change. The report calls on the upcoming conferences for change: “COP27 and the U.N. Biodiversity Conference can accelerate action to address both crises [of reducing emissions and preserving ecosystems]. Immediate action is an imperative if society is to thrive.”
