The Paris agreement climate targets are increasingly out of reach as the world’s publicly listed companies will cause global temperatures to rise by 3 degrees Celsius, according to a recent report.
With less than 10% of public companies aligned with a 1.5 degrees Celsius temperature rise threshold, the global carbon budget to limit global warming to 1.5 degrees Celsius will be exhausted by November 2026, according to MSCI Net-Zero Tracker, a quarterly gauge of the climate-change progress of 9,300 publicly listed companies based on the MSCI All Country World Investable Market Index. This timeframe has moved forward by five months in just 90 days since the launch of the Net-Zero Tracker in July.
The rapidly shrinking timeframe is being driven by the significant rise in greenhouse gas emissions from public companies as global economic activity rebounds, according to the report, which also finds that company emissions are set to rise by 6.7% this year.
As well, less than half of listed companies are aligned with a 2 degrees Celsius temperature rise. No sector or region is aligned with the 2 degrees Celsius target. Even low-emitting industries, such as health care, information technology and financial services, have outliers consuming a disproportionate share of their industry’s remaining budget.
From a regional perspective, although companies in developed economies are projected to become more carbon-efficient this century, every region is still emitting in excess. The problem is most extreme in the emerging markets (EM) of the Europe, Middle East and Africa region, where the implied temperature rise of listed companies is 4.8 degrees Celcius, followed by EM Americas and EM Asia, which are set to rise by 3.8 and 3.4 degees Celsius, respectively.
To address this, companies need to cut their absolute carbon emissions by 10% a year on average. However, from 2016 to 2020, less than a quarter of the world’s publicly listed companies managed this feat.
- Saudi Arabian Oil, Gazprom and Coal India are the top three listed companies with the largest carbon footprint
- Shaanxi Coal Industry Company is the largest emitter to not disclose any of its greenhouse gas emissions
- GlaxoSmithKline, H&M Hennes & Mauritz and Électricité de France are listed in the top 10 companies that have published the most thorough emissions-reduction targets
- Gazprom, A.P. Møller – Mærsk and Toyota Industries reported additional scopes in the previous quarter and are now reporting all company emissions across most of the relevant categories (i.e., Scope 1, 2 and 3).
“While it is encouraging that some of the world’s largest listed companies are taking important steps by broadening their emissions reporting and setting decarbonization targets… major gaps still remain as many are failing to disclose this crucial information,” says Remy Briand, global head of ESG and climate, at MSCI. “Climate disclosures are critical for investors to help them assess the carbon intensity of companies, to model climate-related financial risk and the impact on the performance of portfolios, and to allocate capital accordingly. Without accurate disclosures, the chances of companies and investors reaching net zero is a distant reality.”
Henry Fernandez, chairman and CEO, MSCI, adds: “Climate change is not a ‘potential’ problem 30 or 40 years down the road. It is a clear and present danger to our way of life right now. What we do over the next half-decade – and especially at COP26 in Glasgow – could make the difference between avoiding or experiencing the worst climate impacts.”
